A diffusion chamber containing rabbit bone morphogenetic protein (BMP) was implanted in the abdominal muscle of a Sprague-Dawley rat. Outside of the chamber, cartilage differentiated one to two weeks after implantation, and bone replaced the cartilage three to four weeks after implantation. The interstitial fluid inside the chamber contained only biologic substances produced by cells proliferating and differentiating outside of the chamber. To investigate the cell function during chondrogenesis and osteogenesis, alkaline phosphatase activity and the amounts of S-100 α protein, S-100 β protein, creatine kinase subunits M (CK-M), creatine kinase subunits B (CK-B), hyaluronic acid (HA), and chondroitin sulfate (CS) were measured in the supernatant of interstitial fluid inside the chamber. Alkaline phosphatase activity increased two to four weeks after implantation. The amount of S-100 β protein acutely increased during the fourth week. The amount of CK-B also increased during the fourth week. The increased levels of HA and CS were also observed after two to four weeks. The examination of such native products may help not only to clarify the mechanisms of cartilage and bone development, but also to develop a sensitive bioassay for BMP.