Bone marrow contains a population of rare progenitor cells capable of differentiating into bone, cartilage, tendon, and other connective tissues. These cells, referred to as mesenchymal stem cells, can be purified and culture-expanded from animals and humans and have been shown to regenerate functional tissue when delivered to the site of musculoskeletal defects in experimental animals. To test the ability of purified human mesenchymal stem cells to heal a clinically significant bone defect, mesenchymal stem cells isolated from normal human bone marrow were culture-expanded, loaded onto a ceramic carrier, and implanted into critical-sized segmental defects in the femurs of adult athymic rats. For comparison, cell-free ceramics were implanted in the contralateral limb. The animals were euthanized at 4, 8, or 12 weeks, and healing bone defects were compared by high-resolution radiography, immunohistochemistry, quantitative histomorphometry, and biomechanical testing. In mesenchymal stem cell-loaded samples, radiographic and histologic evidence of new bone was apparent by 8 weeks and histomorphometry demonstrated increasing bone formation through 12 weeks. Biomechanical evaluation confirmed that femurs implanted with mesenchymal stem cell-loaded ceramics were significantly stronger than those that received cell-free ceramics. These studies demonstrate that human mesenchymal stem cells can regenerate bone in a clinically significant osseous defect and may therefore provide an alternative to autogenous bone grafts.