Cellular condensation of chondroprogenitors is a distinct cellular event in chondrogenesis. During this process, N-cadherin mediates cell-cell interactions responsible for the initial stage of cellular condensation and subsequently fibronectin contributes to cell-matrix interactions mediating a progression of chondrogenesis. We previously showed that chondrogenesis in mouse chondrogenic EC cells, ATDC5, was induced, at a high incidence in the presence of insulin, through formation of cellular condensation. In this study, we took advantage of the sequential progression of chondrogenesis in ATDC5 cells and evaluated, in vitro in these cells, the role of endogenous transforming growth factor (TGF)-beta in chondrogenesis. ATDC5 cells expressed TGF-beta(2) mRNA at a cellular condensation stage. The treatment of undifferentiated ATDC5 cells with anti-TGF-beta(2) neutralizing antibody inhibited the accumulation of Alcian blue stainable proteoglycan in a dose-dependent manner. Transfection of a dominant-negative mutant of mouse TGF-beta type II receptor to undifferentiated ATDC5 cells completely inhibited cellular condensation. Moreover, exogenously administered TGF-beta(2) upregulated the expression of fibronectin and type II collagen (a phenotypic marker gene of chondrogenesis) mRNAs and downregulated that of N-cadherin mRNA in time- and dose-dependent manners. These results indicate that TGF-beta stimulates chondrogenesis via initiation of cellular condensation by transition from an initial N-cadherin-contributing stage to a fibronectin-contributing stage during processes of chondrogenesis in ATDC5 cells.