Bone-forming property of 0.6 M HCl decalcified (a) allogeneic bone matrix preserved in 70% alcohol, (b) allogeneic bone matrix preserved in anaesthetic ether, (c) allogeneic 'Ossein' provided by the Leather Research Institute, Madras, and (d) xenogeneic bone-matrix preserved in alcohol was studied by fitting the implants in surgically created complete circumferential osteo-periosteal gaps in the ulna of rabbits. Bone formation was assessed radiologically, macroscopically, histologically, and by tetracycline fluorescence up to 16 postimplantation weeks. Successful bridging of the gap by new bone formation was observed in 75% of (a) and 28.6% of (d) preserved up to 2 weeks. Ether-preserved implants did not induce bone formation. The 'Ossein' implants remained as inert material neither invaded by host cells nor inducing any bone formation. The xenogeneic implants exhibited local immune response which was probably responsible for poor osteogeneic response. Bone forming quality of bone-matrix implants appears to be influenced by the chemical treatment during preparation and preservation, host cellular response and immune reaction invoked by the implant.