A limited number of in vivo models that rapidly assess bone development or allow for the study of tumor progression in a closed in vivo environment exist. To address this, we have used bone tissue engineering techniques to generate a murine in vivo bone bioreactor. The bioreactor was created by implanting an osteoconductive hydroxyapatite scaffold pre-loaded with saline as a control or with bone morphogenetic protein-2 (BMP-2) to the murine femoral artery. Control and BMP-2 bioreactors were harvested and histologically assessed for vascularization and bone formation at 6 and 12 weeks post implantation. BMP-2 significantly enhanced the formation of osteoid within the bioreactor in comparison to the controls. To test the in vivo bone bioreactor as a model of tumor: bone interaction, FVB mice were implanted with control or BMP-2 treated bioreactors. After 6 weeks, an osteolytic inducing mammary tumor cell line tagged with luciferase (PyMT-Luc) derived from the polyoma virus middle T (PyMT) model of mammary tumorigenesis was delivered to the bioreactor via the femoral artery. Analysis of luciferase expression over time demonstrated that the presence of osteoid in the BMP-2 treated bioreactors significantly enhanced the growth rate of the PyMT-Luc cells in comparison to the control group. These data present a unique in vivo model of ectopic bone formation that can be manipulated to address molecular questions that pertain to bone development and tumor progression in a bone environment.