Subcutaneous implants of a recombinant human form of the bone-inducing protein rhBMP-2 (recombinant human bone morphogenetic protein-2) in rats have resulted in the local induction of endochondral bone formation. To test the osteoinductive activity of rhBMP-2 in an osseous location, we created five-millimeter segmental defects in the femora of forty-five adult male Sprague-Dawley rats. Two doses of lyophilized rhBMP-2 (1.4 or 11.0 micrograms) were implanted in each defect, together with guanidine-hydrochloride extracted demineralized rat-bone matrix as a carrier, and the results were compared with those in rats that had implantation of guanidine-hydrochloride extracted demineralized rat-bone matrix only. The formation and healing of bone were determined by radiographic, histological, and mechanical analysis. Both doses of rhBMP-2 induced formation of endochondral bone in the osseous defects in a dose-related manner. Implantation of 11.0 micrograms of rhBMP-2 yielded significant (p less than 0.05) bone formation, resulting in radiographic, histological, and mechanical evidence of union. Despite new-bone formation in the defects that had received 1.4 micrograms of rhBMP-2, no instances of union were observed.