Chick embryos cultured in the absence of their eggshell are rendered severely calcium-deficient, and develop a cartilage-like phenotype in the calvarium, a normally osteogenic tissue. In the preceding paper (Jacenko and Tuan [1995] Dev. Dyn. 202:13-26), experiments using organ cultured calvaria from day-12 normal and shell-less embryos showed that depletion of calcium alone may be responsible in promoting chondrogenic differentiation in calvaria. Here these findings were extended using an in vivo calvarial grafting technique, such that the extent of calvarial matrix calcification was a function of the calcium status of both the graft and the host. In these calvarial grafts, undermineralized regions again were shown to support chondrogenesis. To identify possible mechanisms which promote chondrogenesis in the calvaria, cells were enzymatically dissociated from the calvaria and cultured in media with varied levels of soluble calcium, under conditions which should modulate cell-to-cell interactions, including monolayer, micromass, agarose gels, and suspension cultures. Soluble calcium had no effect on calvarial cell differentiation, whereas conditions which enhanced cell-cell interactions, e.g., suspension culture, elicited cartilage expression. Based on these findings, we propose that the calcified matrix of the calvarium is repressive to chondrogenesis during normal development, but that the lack of mineral in a calcium-deficient calvarium creates a microenvironment permissive for cell-to-cell interactions which lead to chondrogenic differentiation.