Cranial particulate bone graft heals inlay calvarial defects and can be harvested as early as infancy. The purpose of this study was to test the hypothesis that particulate bone promotes ossification primarily by osteogenesis. Freshly harvested particulate bone, devitalized particulate bone, and high-speed drilled bone dust from rabbit calvaria were assayed for metabolic activity (resazurin) and viable osteoblasts (alkaline phosphatase). A rabbit cranial defect model was used to test the effect of devitalizing particulate bone on in vivo ossification. A parietal critical-size defect was created and managed in three ways: (1) no implant (n = 6); (2) particulate bone implant (n = 6); and (3) devitalized particulate bone implant (n = 6). Micro-computed tomographic scanning was used to measure ossification 16 weeks later; histology also was studied. Particulate bone contained more viable cells (0.94 percent transmittance per milligram) compared with devitalized particulate bone (0.007 percent) or bone dust (0.21 percent) (p = 0.01). Particulate bone had greater alkaline phosphatase activity (0.13 μU/μg) than devitalized particulate bone (0.000) or bone dust (0.06) (p = 0.01). Critical-size defects treated with particulate bone had more ossification (99.7 percent) compared with devitalized particulate bone implants (42.2 percent) (p = 0.01); no difference was found between devitalized particulate bone and the control (40.8 percent) (p = 0.9). Particulate bone graft contains living cells, including osteoblasts, that are required to heal critical-size cranial defects. These data support the hypothesis that particulate bone promotes ossification primarily by osteogenesis.