Alcohol abuse is a risk factor for bone fractures. Following a fracture, alcoholics have a higher risk for impaired fracture healing. However, the specific alcohol-induced defect(s) in bone healing are not known. Alcohol is a potent inhibitor of bone formation during bone growth and turnover. Thus, the purpose of this study was to determine the effects of alcohol consumption on induction of new bone formation. Demineralized allogeneic bone matrix (DABM) cylinders were used to model osteoinduction in a rat model for chronic alcohol abuse. DABM cylinders, prepared from femurs and tibiae of rats fed a normal diet, were implanted into sexually mature male rats adapted to alcohol (ethanol contributed 35% of caloric intake) or control liquid diets. Food intake in the control rats was restricted to match food intake of alcohol-fed animals. The implants were recovered 6 weeks later and analyzed by histology, muCT and chemical analysis. Histological evaluation revealed a robust osteoinductive response, resulting in mature bone ossicle formation, in DABM implants in rats fed the control diet. Alcohol consumption affected bone mass and architecture of the DABM implants but not volumetric density or mineral composition. Specifically, alcohol consumption resulted in significant decreases in DABM-induced bone volume, bone volume/mg original cylinder weight, connectivity density, trabecular number and thickness, ash weight and % ash weight. There were no changes in mineral (ash) density nor in the relative amounts of calcium, magnesium, iron, selenium and zinc (microg/mg ash), indicating that alcohol consumption did not impair mineralization. Taken together, these results show that alcohol abuse resulted in decreased bone formation within the DABM implant. We conclude that reduced osteoinduction may contribute to impaired bone healing in alcoholics.