The authors have attempted to devise a standardized method of assay of the ability to produce bone by a tissue to be used for grafting. Autogenous periosteum of rabbits was studied by this method and the osteogenetic potency of the tissue was found to vary considerably, depending on the age of the animal and the character of the recipient bed used. In situ grafts on the tibia were most successful, subcapsular grafts on the kidney moderately so, and grafts into the anterior chamber of the eye showed the least amount of osteogenesis. The formation of cartilage by grafts of periosteum was frequently noted. A gradient of response by a tissue has been described which includes the amount and type of intercellular material elaborated in response to stimuli. These local stimuli are believed to be primarily chemical rather than mechanical or circulatory.