The progressive loss of endogenous regenerative capacity that accompanies mammalian aging has been attributed at least in part to alterations in the extracellular matrix (ECM) composition of adult tissues. Thus, creation of a more regenerative microenvironment, analogous to embryonic morphogenesis, may be achieved via pluripotent embryonic stem cell (ESC) differentiation and derivation of devitalized materials as an alternative to decellularized adult tissues, such as demineralized bone matrix (DBM). Transplantation of devitalized ESC materials represents a novel approach to promote functional tissue regeneration and reduce the inherent batch-to-batch variability of allograft-derived materials. In this study, the osteoinductivity of embryoid body-derived material (EBM) was compared to DBM in a standard in vivo ectopic osteoinduction assay in nude mice. EBM derived from EBs differentiated for 10 days with osteogenic media (+β-glycerophosphate) exhibited similar osteoinductivity to active DBM (osteoinduction score = 2.50 ± 0.27 vs. 2.75 ± 0.16) based on histological scoring, and exceeded inactive DBM (1.13 ± 0.13, p < 0.005). Moreover, EBM stimulated formation of new bone, ossicles, and marrow spaces, similar to active DBM. The potent osteoinductivity of EBM demonstrates that morphogenic factors expressed by ESCs undergoing osteogenic differentiation yield a novel devitalized material capable of stimulating de novo bone formation in vivo.