Bone grafting is a preferred treatment option for the healing of large diaphyseal bone defects and is useful in the management of nonunion, delayed union, and tumor resection. To investigate a decellularization protocol of bovine cancellous bone for xenogenic implantation in radial bone defects in rabbits. Bovine bone scaffolds fabricated with various decellularization protocols viz phosphate buffer saline (PBS), 1% sodium dodecyl sulfate (SDS), and rapid freeze and thaw technique. The manufactured scaffolds were characterized by biomechanical testing, histological staining, and scanning electron microscopy. A 10 mm rabbit radius bone defect was repaired with autograft and SDS treated and rapid freeze and thaw in groups A, B, and C respectively. Healing was evaluated by radiography and histopathology at 0, 30, 60, and 90 days. The grafts were also checked for host tissue reaction and incorporation into the defect. The freeze and thaw group showed complete elimination of all cellular nuclei, regular arrangement of collagen fiber, and no significant difference in tensile strength compared to 1% SDS treated and native groups. The in vivo radiographic and histopathological study showed that the rapid freeze and thaw group had complete bridging of the bone gap defect with new bone formation and they were immunologically less reactive compared to group B. The in vitro and in vivo evaluation of the grafts suggested that freeze and thaw technique was most superior to all other techniques for effective decellularization and augmentation of bone healing with better integration of the graft into the host.