The bone resorbing agent, prostaglandin E2 (PGE2), was found to alter several components of the plasminogen activator (PA)/plasmin pathway in primary cultures of rat neonatal osteoblast-like cells. The mRNA and activities of both urokinase-type PA (uPA) and tissue-type PA (tPA) were enhanced by PGE2 treatment. The presence of mRNA for the uPA receptor (uPAR) has been demonstrated in these cells and steady-state levels shown to be greatly enhanced, the response being rapid and sustained for at least 24 hours. mRNA for plasminogen activator inhibitor 1 (PAI-1) was modulated in a biphasic manner, with inhibition of the constitutive level apparent at 4 hours of treatment and stimulation apparent at 12 hours and longer, while PAI-1 protein, measured by an ELISA assay for rat PAI-1, was diminished over this period. Neither PAI-2 mRNA nor mRNA for the broad spectrum protease inhibitor, protease nexin-1 (PN-1), was found to be modulated by PGE2. Therefore, PGE2 is likely to stimulate cell surface proteolytic activity, since uPA mRNA and cell-associated activity were elevated, as was mRNA for the cellular receptor for uPA. Although it was not possible to measure uPAR number and affinity it seems likely that elevated uPAR mRNA would translate into increased uPARs which would localize the increased uPA activity to the pericellular region. tPA mRNA and activity were also increased transiently with the activity inhibited with prolonged incubations, apparently by PAI-1. Elevation of tPA mRNA and activity may result in elevated activity within the extracellular matrix as tPA has been reported to associate with several matrix proteins. Thus the early effect of PGE2 would be to promote proteolysis, both pericellularly and in the extracellular matrix. The inhibition of PAI-1 mRNA and protein, which would contribute to the elevation of activity, is due to PGE2, but the later stimulatory effect on PAI-1 mRNA may be due to feedback regulation by transforming growth factor beta (TGF beta), secreted by osteoblasts and activated by elevated levels of PA.