A new small animal model of bone atrophic nonunion was established for investigating the process of bone regeneration by performing cauterization of the periosteum, removal of the local bone marrow, and stabilization with external fixation. The model allows the creation of an atrophic nonunion without the need for a critical size defect. Furthermore, it provides reproducible, well-defined mechanical conditions and minimized physical interference of the implant with the biological processes in the healing zone. Eighty adult Sprague-Dawley rats received an osteotomy of the left femur, stabilized with an external fixator. In half of the animals, the periosteum proximal and distal to the osteotomy was destroyed by cauterization and the adjacent bone marrow was removed (nonunion group). At 2 and 8 weeks after surgery, radiological, biomechanical, histological, and histomorphometrical analyses showed a typical physiological healing in the control group, while the nonunion group was characterized by resorption of the bone ends with some callus formation distant to the osteotomy. At both time points, the callus was composed of significantly less bone and significantly more connective tissue (p < 0.001). In addition, the torsional strength of the osteotomized femur was significantly less in the nonunion group than in the control group, which was comparable to that of the intact femur (p < 0.001). In conclusion, the present model allows the induction of an atrophic nonunion without the need of a critical size defect. It is reproducible, provides standardized biomechanical conditions, and allows minimized interaction of the implant with the healing zone.