While it is well established that factor XIII functions in crosslinking of the fibrin clot during blood coagulation and in wound healing, the physiological role of tissue transglutaminase is still unclear. Recent studies suggest that the expression of tissue transglutaminase correlates with (terminal) differentiation of cells and that the enzyme may play a role in extracellular matrix remodeling. In cartilage, tissue transglutaminase expression is restricted to hypertrophic chondrocytes and the enzyme is externalized at a distinct step in the chondrocyte maturation program. Upon activation by Ca2+, the transglutaminase modifies matrix constituents in a way that might predispose the matrix for the subsequent mineralization. Crosslinks of the structure gamma-glutamyl-epsilon-lysine are also abundant in bone matrix, but the transglutaminase expressed by osteoblasts and presumably involved in crosslinking of newly formed osteoid is likely to be distinct from both tissue transglutaminase and factor XIII. Matrix proteins thought to be crosslinked by transglutaminases in cartilage and bone matrix include glycoproteins such as osteonectin, osteopontin, fibronectin, fibrillin, and collagens II, III, V, and XI. Expression of the A subunit of factor XIII is restricted to megakaryocytes in the bone marrow cavity, and factor XIIIa is abundant in platelets that probably provide the major source for factor XIII in plasma.