Numerous preclinical studies have shown that osseous defects can be repaired by implanting bone morphogenetic protein (BMP)-2-transduced muscle cells. However, the drawback of this treatment modality is that it requires the isolation and long-term (approximately 3 weeks) culture of transduced autologous cells, which makes this approach cumbersome, time-consuming, and expensive. Therefore, we transferred BMP-2 cDNA directly to muscle tissue fragments that were held in culture for only 24 hr before implantation. We evaluated the ability of such gene-activated muscle grafts to induce bone repair. Two of 35 male, syngeneic Fischer 344 rats used in this study served as donors for muscle tissue. The muscle fragments remained unmodified or were incubated with an adenoviral vector carrying the cDNA encoding either green fluorescent protein (GFP) or BMP-2. Critical-size defects were created in the right femora of 33 rats and remained untreated or were filled (press fitted) with either unmodified muscle tissue or GFP-transduced muscle tissue or with BMP-2-activated muscle tissue. After 6 weeks, femora were evaluated by radiography, microcomputed tomography (muCT), histology, and biomechanical testing. Six weeks after implantation of BMP-2-activated muscle grafts, 100% of the bone defects were bridged, as documented by radiographs and muCT imaging, and showed formation of a neocortex, as evaluated by histology. Bone volumes of the femora repaired by BMP-2-transduced muscle were significantly (p = 0.006) higher compared with those of intact femora and the biomechanical stability was statistically indistinguishable. In contrast, control defects receiving no treatment, unmodified muscle, or GFP-transduced muscle did not heal. BMP-2 gene-activated muscle grafts are osteoregenerative composites that provide an expedited means of treating and subsequently healing large segmental bone defects.