The histiogenesis and mechanisms of bone destruction in giant cell tumor (GCT) of bone are not well understood. We asked whether the spindle-like stromal cells of GCT of bone exhibit osteoblastic properties, and whether the stromal cells produce active matrix-degrading proteases in vitro. We performed immunohistochemistry on 17 paraffin-embedded archival specimens with a pathologic diagnosis of GCT with monoclonal antibodies for the osteoblastic lineage markers osteopontin, osteonectin, and osteocalcin. The average staining grade for the 17 specimens was highest for osteonectin, followed by osteopontin, and osteocalcin. Primary cell cultures of GCT stromal cells were prepared from two fresh tumor specimens. Western blots were used on the cell lysates and media to detect osteocalcin precursor and the matrix-degrading proteases MMP-2 and MMP-9. We found the stromal cells in culture produce osteocalcin precursor, indicating osteoblastic lineage. The cells also express both the active and inactive isoforms of MMP-2 and MMP-9. Gelatinase assays confirmed the activity of the proteases in vitro. The spindle like stromal cells of GCT have characteristics of osteoblast progenitors and produce active matrix-degrading proteases. These cells may therefore play a central role in bone destruction.