The gamma irradiation has been used for end sterilization of allograft bones and its effects with a 25 kGy dosage on the osteoinductive properties of demineralized bone allograft powder was studied. This work carried out using an experimental method in an animal model. In this study the demineralized bone allograft powder which had been sterilized and prepared with gamma irradiation in a 25 kGy dosage in 18 hours, was used as a study group and the demineralized bone allograft powder which had been prepared aseptically was used as the reference group. 30 mg of bone powder from each group were implanted into right and left paravertebral muscles of eighteen rats, separately. After four weeks, the implanted samples were harvested with a 0.5 cm border and then the osteoinductivity of implants in two groups were compared with histopathologic studies. In 94.4% of the reference samples a new bone formation was observed. In the study group, this difference was observed only in 27.7% of samples (P<0.002). It appears that using gamma irradiation may lead to a reduction in osteoinduction properties of demineralized bone allograft powder.