To maintain its functional integrity, bone is continuously remodelled by a process involving resorption by osteoeclasts and formation by osteoblasts, In order to respond to changes in the physical environment or to trauma with the relevant action, this process is strictly regulated by locally synthesized or systemic fators, Prostaglandin $E_2(PGE_2$) is perhaps one of the best studied factors, having been known to affect bone cell function for several decades.$PGE_2$ has both anabolic and catabolic activities. Excess of $PGE_2$ has been implicated in a number of pathological states associated with bone loss in a number of chronic inflammatory conditions such as periodontal disease and rheumatoid arthritis. $PGE_2$ and other arachidonic acid metabolites have been shown to be potent stimulators of osteoclastic bone resorption in organ culture. The anabolic effects of $PGE_2$ were first noticed when an increase in periosteal woven bone formation was seen after the infusion of $PGE_2$ into infants in order to prevent closure of the ductus arteriosus. The cellular basis for the catabolic actions of $PGE_2$ has been well characterized. $PGE_2$increases osteoclast recruitment in bone marrow cell cultures. Also $PGE_2$ has a direct action on osteoclast serving to inhibit activity and can also indirectly activate osteoclast via other cells in the vicinity, presumably osteoblast. The cellular mechanisms for the anabolic actions of $PGE_2$ are not nearly so well understood. The purpose of this paper was to study the effects of $PGE_2$ and dibutyl(DB)cAMP on osteoblastic clone MC3T3El cells and on the generation of osteoclasts from their precursor cells. The effect of $PGE_2$ and DBcAMP on the induction of alkaline phoaphatase(AlP) was investigated in osteoblastic clone MC3T3El cells cultured in medium containing 0.4% fetal bovine serum. $PGE_2$ and DBcAMP stimulated ALP activity and MTT assay in the cells in a dose-dependent manner at concentrations of lO-SOOng/ml. Cycloheximide, protein synthesis inhibitor, inhibited the stimulative effect of $PGE_2$ and DBcAMP on ALP activity in the cells. $PGE_2$also increased the intracellular cAMP content in a dose-dependent fashion with a maximal effect at 500ng/ml. The effect of $PGE_2$ on the generation of osteoclasts was investigated in a coculture system of mouse bone marrow cells with primary osteoblastic cells cultured in media containing 10% fetal bovine serum.After cultures, staining for tartrate-resistant acid phosphatase(TRAP)-marker enzyme of osteoclast was performed. The TRAP(+) multinucleated cells(MNCs), which have 3 or more nuclei, were counted. More TRAP(+) MNCs were formed in coculture system than in control group. $PGE_2(10^{-5}10^{-6}M)$ stimulated the formation of osteoclast cells from mouse bone marrow cells in culture. $PGE_2(10^{-6}M)$ stimulated the formation of osteoclast cells from mouse bone marrow cells in coculture of osteoblastic clone MC3T3E1 cells This results suggest that $PGE_2$ stimulates the differentiation of osteoblasts and generation of osteoclast, and are involved in bone formation, as well as in bone resorption.