In dogs, resection of a length of the ulna equal to twice the diameter of the mid-shaft leaves a defect which consistently fails to unite. In response to an implant of 100 mg of bovine bone morphogenetic protein (BMP), the defect becomes filled by callus consisting of fibrocartilage, cartilage and woven bone within four weeks. The cartilage is resorbed and replaced by new bone in four to eight weeks. Woven bone is then resorbed, colonised by bone marrow cells and remodelled into lamellar bone. Union of the defect is produced by 12 weeks. Control defects filled with autogeneic cortical bone chips unite after the same period. In regeneration induced by bone morphogenetic protein (BMP) and in repair enhanced by bone graft, union depends upon the proliferation of cells within and around the bone ends. Our working hypothesis is that BMP induces the differentiation of perivascular connective tissue cells into chondroblasts and osteoprogenitor cells and thereby augments the process of bone regeneration from the cells already present in the endosteum and periosteum.