We investigated the effects of insulin (1–1,000 nM), insulin-like growth factor (IGF)-I, and IGF-II (3–100 nM each) alone or together with 10 nM dexamethasone (DEX) or 10 nM 1,25-dihydroxyvitamin D₃ (1,25[OH]₂D₃) on proliferation and differentiation of adipocyte and osteoblast progenitors in bone cell populations derived from fetal rat calvaria. The effects on differentiation were evaluated by counting the number of bone or osteoid nodules and adipocyte colonies and the effects on proliferation, by measuring their size by image analysis. The types of cells studied were 1,25(OH)₂D₃- and DEX-responsive adipocyte progenitors and DEX-dependent and independent osteoprogenitors. Both IGF-I and IGF-II stimulated osteoprogenitor differentiation both alone and in the presence of DEX, while insulin stimulated osteoprogenitor differentiation only in the absence of DEX. Neither IGF-I/-II nor insulin affected proliferation of osteoprogenitors. Insulin had little effect on adipocyte differentiation by itself but strongly stimulated differentiation in the presence of either 1,25(OH)₂D₃ or DEX, while IGF-II stimulated adipocyte differentiation in both the absence and presence of 1,25(OH)₂D₃ or DEX. IGF-I by itself or in the presence of DEX strongly stimulated adipocyte cell differentiation but had little effect in the presence of 1,25(OH)₂D₃. Our results demonstrate that insulin, IGF-II, and IGF-I have specific and different effects on the differentiation and proliferation of different groups of progenitor cells.