The aim of this study was to find a safe, effective sterilization method that does not destroy the bone-inductive capacity of demineralized bone implants. Five sterilizing agents were tested in rats. Implants procured and processed under sterile conditions served as controls. New bone formation was evaluated by determining dry weight, calcium content, and Sr-85 incorporation of the induced ossicles. Glutaraldehyde solution, formaldehyde gas, and ethylene oxide destroyed almost all the bone-inductive capacity. Irradiation by 2.5 Mrads Co-60 resulted in a loss of about half of the inductive capacity. Merthiolate (0.18 per cent) was the only sterilizing agent that did not reduce the bone-inductive capacity of the demineralized implants. Because merthiolate is not sporicidal, gamma irradiation appears to be the most appropriate sterilizing agent for demineralized bone in clinical use.