Forty years ago, Marshall Urist described a partially purified extract of demineralized bone matrix which induced the formation of ectopic bone. This substance, bone morphogenetic protein/non-collagenous protein (BMP/NCP), was never purified to homogeneity but other investigators used similar starting materials to clone a number of recombinant BMPs. Urist recognized that his material probably contained the BMPs which had been cloned by others but always contended that it contained another, more potent, bone inducing material which differed significantly in its physical and chemical properties from the known BMPs. We have used Urist's protocol to isolate a protein that has the chemical and physical properties of Urist's "BMP". It is an 18.5 kD fragment of the bone matrix protein, SPP-24. This fragment contains the cystatin-like domain of SPP-24. We have located a 19 amino acid region which is similar to the TGF-beta/BMP-binding region of fetuin, a member of the cystatin family of protease inhibitors. A cyclic peptide, which we call BMP binding peptide (BBP) was generated using this sequence. The peptide avidly bound rhBMP-2 with a KD of 3 x 10(-5) M. When implanted alone in mouse muscle, the peptide frequently induced dystrophic calcification. When implanted with rhBMP-2, the peptide enhanced the osteogenic activity of the recombinant molecule. We hypothesize that Urist's "BMP" was a fragment of SPP-24 which influenced bone induction by binding to bone morphogenetic proteins. BBP may be clinically useful because of its effects on other bone-inducing substances.