Glucocorticoids, notably dexamethasone (Dex), have been reported to be a requirement for osteoprogenitor cell differentiation in young adult rat bone marrow stromal cell populations. We have reinvestigated the requirement for Dex and analyzed the frequency of osteoprogenitor cells present. Stromal cells were grown as primary or first subcultures in the presence or absence of Dex and their expression of osteogenic markers (alkaline phosphatase activity, hormone responsiveness, and matrix molecules, including type I collagen, osteopontin, bone sialoprotein, and osteocalcin), as well as their functional capacity to differentiate to form a mineralized bone nodule, were assessed. Dex increased, but was not an absolute requirement for, the expression of osteogenic markers. Bone nodule formation was plating cell density dependent and occurred under all combinations of treatment with or without Dex but was maximal when Dex was present in both the primary and secondary cultures. Dex increased CFU‐F by ∼2‐fold, but increased CFU‐O (osteoprogenitor cells; bone nodule forming cells) by 5‐ to 50‐fold depending on the cell density and duration of treatment. Neither CFU‐F nor CFU‐O expression followed a linear relationship in limiting dilution analysis until very high cell densities were reached, suggesting cooperativity of cell types within the population and a multitarget phenomenon leading to osteoprogenitor differentiation. When a large number of nonadherent bone marrow cells or their conditioned medium was added to the stromal cells, osteoprogenitors comprised approximately 1/100 of plated adherent cells and their expression followed a linear, single‐hit relationship. By contrast, rat skin fibroblasts or their conditioned medium totally inhibited bone nodule formation. These data support the hypothesis that in marrow stroma, as in other bone cell populations such as those from calvaria, there are at least two classes of osteoprogenitor cells: those differentiating in the absence of added glucocorticoid and those requiring glucocorticoid to differentiate, that more than one cell type is limiting for stromal osteoprogenitor differentiation suggesting a role for heterotypic cell–cell interactions in osteogenesis in this tissue, and that Dex may be acting directly and/or indirectly through accessory cells in the bone marrow to alter osteoprogenitor cell expression. J. Cell. Biochem. 72:396–410, 1999. © 1999 Wiley‐Liss, Inc.