Despite the high innate regenerative capacity of bone, large osseous defects fail to heal and remain a clinical challenge. Healing such defects requires the formation of large amounts of bone in an environment often rendered hostile to osteogenesis by damage to the surrounding soft tissues and vasculature. In recent years, there have been intensive research efforts directed towards tissue engineering and regenerative approaches designed to overcome this multifaceted challenge. In this paper, we describe and critically evaluate the state-of-the-art approaches to address the various components of this intricate problem. The discussion includes (i) the properties of synthetic and natural scaffolds, their use in conjunction with cell and growth factor delivery, (ii) their vascularisation, (iii) the potential of gene therapies and (iv) the role of the mechanical environment. In particular, we present a critical analysis of where the field stands, and how it can move forward in a coordinated fashion.