Normal postnatal somatic growth becomes progressively dependent on GH with time. In contrast to other hormones, GH is the only hormone known to produce a dose-dependent stimulation of postnatal growth. Most of the effects attributed to GH action appear to be the result of a direct effect of GH on cells in different peripheral tissues, including cartilage. In addition to the growth-stimulating effect, GH has the intrinsic properties of being able to exert both insulin-like and insulin-antagonistic effects in adipose tissue and skeletal muscle. These two apparently antagonistic effects seem to be explained by the stage of responsiveness of the target cells to GH, which is determined by the previous influence of endogenous GH. An inhibition of adenylate cyclase with a concomitant decrease in intracellular cAMP might be an important early cellular event in the course of GH action, but it is not known whether or how this change in nucleotide metabolism relates to the various expressed effects of the hormone. The recognition that GH directly interacts with chondrocytes in cartilage suggests that alterations in the concentration of circulating somatomedins cannot be the only factor regulating skeletal growth. The recent discovery by Green and coworkers (42) demonstrating that GH specifically stimulates the differentiation of cloned preadipose cells and myoblasts in tissue culture may be a major breakthrough in the understanding of the mechanism of action of the growth-promoting effect of GH. Green (42) has proposed that GH directly stimulates terminal differentiation of cells in many different tissues including epiphyseal plate cartilage. The finding that GH binds specifically to cells in the resting cell zone but not to differentiated chondrocytes in the growth plate suggests that prechondrocytes in the growth plate are the target cells for GH action. If it is correct that GH directly stimulates the differentiation of prechondrocytes, we suggest that, during the process of chondrocyte differentiation in the growth plate, the genes that code for growth factors of the somatomedin class, such as IGF-I, are expressed. As a consequence, the clonal expansion of the chondrocytes in the proliferative zone of the growth plate that occurs in vivo during the process of normal growth is the result of this local production of growth factors.