Estradiol (E2) replacement therapy effectively prevents or delays postmenopausal bone loss, but the mode of E2 action on bone is still unknown. Recently, the presence of E2 receptors was described for bone-derived cells. In this study we examined the estrogen responsiveness of osteoblastic cells using the experimentally immortalized calvarial cell lines RCT-1 and RCT-3 as well as primary cultures of calvarial and trabecular bone cells. E2 treatment reduced PTH-stimulated adenylate cyclase activity by 20–30% in RCT cells; the maximum effect was observed after treatment with 1 nM E2 for 4 h or longer. In trabecular cells E2 decreased PTH-stimulated adenylate cyclase activity by 60–80%. After a lag period of at least 48 h, E2 treatment (0.01–10 nM) increased cell number and [3H]thymidine incorporation in both RCT-3 cells and primary cultures of trabecular cells to 20–60% above control values. Half-maximal effects were observed at about 1 nM E2. Antibodies against insulin-like growth factor-I (IGF-I) inhibited the E2-induced proliferation in a dose-dependent manner without affecting basal growth. Furthermore, E2 treatment increased the steady state levels of IGF-I mRNA 2- to 2.5-fold in calvarial and RCT-3 cells compared to control levels. In addition, E2 (10 nM) increased the level of collagen mRNA more than 2-fold and opposed the suppression of collagen mRNA produced by PTH treatment. The E2 effects were specific to 17β-E2, since they were not observed with the biologically less active stereoisomer 17α-E2 and were blocked by the E2 antagonist tamoxifen (1 μM). Thus, for osteoblastic cells in culture, E2 can directly stimulate proliferation as well as collagen and IGF-I mRNA while decreasing PTH responsivness; these effects could explain the anabolic and anticatabolic effects of E2 on bone.