Transforming growth factor-$eta$ (IGF-$eta$)s are multifunctional small polypeptides synthesized in most cell types. TGF-$eta$ exerts pivotal effects on both bone formation and resorption. In addition, increasing lines of evidence implicate TGF-$eta$ as a potential coupling factor between these two processes during bone remodeling. In the present study, the expression form and the activation mechanism of latent-TGF-$eta$ were investigated using specific antibodies for each isoform. TGF-$eta$s were observed to be synthesized and accumulated in a large amount in cultured osteoblastic cells. The estimated molecular weights of intracellular TGF-$eta$2 and -$eta$3 were 49 and 55 kDa, respectively. Based on proteolytic digestion study and immunofluorescence observation, these precursor forms seemed to be accumulated in distinct intracellular compartments. To examine whether the internal pool of TGF-$eta$ was possiblely regulated by external signals, their biological activites were examined in a conditioned media of this cell. Although the intact conditioned media did not contain detectable TGF-$eta$ activity, heat-treatment or acid-activation of the conditioned media revealed significant TGF-$eta$ activity. Furthermore, in the presence of estrogen, this activity was dramatically diminished. It is known that activation of latent TGF-$eta$ can be achieved by different chemical and enzymatic treatments, or by incubation with certain cell types. This extracellular activation was suggested as a key step in the regulation of TGF-$eta$ activity. In addition to these extracellular activation, this study suggests that the synthesis and intracellular processing are important regulation steps for TGF-$eta$ action. In addition, this regulation Is specific for TGF-$eta$ type 2, because the change was not observed in TGF-$eta$3 in osteoblastic cell line.