We studied the effect of demineralized bone matrix on the repair of large femoral diaphyseal defects in a rat model by clinical, radiographic, and biomechanical methods. A standard procedure was first developed to create segmental defects that did not heal and in which non-union developed consistently. The effect of demineralized bone matrix on repair was then assessed by physical examination, serial radiographs, and biomechanical studies to determine deformation to failure, stiffness, torsional strength, and energy absorption. By twelve weeks, the defects that had been treated with demineralized bone matrix showed satisfactory repair and remodeling in most animals based on clinical and radiographic evaluation. The biomechanical studies demonstrated that the bone induced by demineralized bone matrix had an energy-absorption capacity and stiffness equal to those of intact rat femoral bone. The bone induced by demineralized bone matrix achieved 35 per cent of the torsional strength of normal bone and an increased capacity to deform under load. These biomechanical properties are similar to those observed in the early stages of normal fracture repair. Clinical Relevance: An effective, readily available alternative to autologous bone-graft material would have a variety of clinical uses in orthopaedic surgery, such as augmenting fusions, aiding in the repair of high-risk fractures, and filling or bridging bone defects. Demineralized bone matrix may provide an important tool for these purposes by inducing bone that has the mechanical properties of fracture callus. This would reduce the morbidity associated with harvesting autologous bone and have an advantage over allografts or synthetic biomaterials that require incorporation by the host before they can support mechanical loads.