Using bone decalcified with 0-6 N hydrochloric acid as an inducing agent, the inductive capacity of different soft tissue sites was investigated. Muscle and fascia regularly permitted the induction of bone, while spleen, liver and kidney suppressed bone induction. Bone formation could be induced in these organs if living autologous fascia was implanted together with the inducing agent; while bone formation was inhibited when living autologous spleen tissue was implanted with the inducing agent to normally favourable sites. The administration of systemic heparin and the diphosphonate ethane-1-hydroxyl, 1-diphosphonic acid (EHDP) suppressed bone induction. It is suggested that for bone induction to occur in soft tissues, three conditions must be present: 1) an inducing agent; 2) an osteogenic precursor cell; and 3) an environment which is permissive to osteogenesis. The presence of osteogenic inhibitors in spleen, liver and kidney is postulated.