Introduction The purposes of this study were to differentiate embryonic limb bud cells into cartilage, characterize the nodules produced, and determine their ability to heal a mouse skull defect. Methods Aggregated mouse limb bud cells (E12-E12.5), cultured in a bioreactor for 3 weeks, were analyzed by histology or implanted in 6 skull defects. Six controls had no implants. The mice were scanned with microcomputed tomography weekly. At 2 and 4 weeks, a mouse from each group was killed, and the defect region was prepared for histology. Results Chondrocytes in nodules were mainly hypertrophic. About 90% of the nodules mineralized. BrdU staining showed dividing cells in the perichondrium. Microcomputed tomography scans showed increasing mineral in implanted nodules that completely filled the defect by 6 weeks; defects in the control mice were not healed by then. At 2 and 4 weeks, the control skull sections showed only a thin bony layer over the defect. At 2 weeks, bone and cartilage filled the defects with implants, and the implants were well integrated with the adjacent cortical bone. At 4 weeks, the implant had turned almost entirely into bone. Conclusions Cartilage differentiated in the bioreactor and facilitated healing when implanted into a defect. Engineering cartilage to replace bone is an alternative to current methods of bone grafting. The purposes of this study were to differentiate embryonic limb bud cells into cartilage, characterize the nodules produced, and determine their ability to heal a mouse skull defect. Aggregated mouse limb bud cells (E12-E12.5), cultured in a bioreactor for 3 weeks, were analyzed by histology or implanted in 6 skull defects. Six controls had no implants. The mice were scanned with microcomputed tomography weekly. At 2 and 4 weeks, a mouse from each group was killed, and the defect region was prepared for histology. Chondrocytes in nodules were mainly hypertrophic. About 90% of the nodules mineralized. BrdU staining showed dividing cells in the perichondrium. Microcomputed tomography scans showed increasing mineral in implanted nodules that completely filled the defect by 6 weeks; defects in the control mice were not healed by then. At 2 and 4 weeks, the control skull sections showed only a thin bony layer over the defect. At 2 weeks, bone and cartilage filled the defects with implants, and the implants were well integrated with the adjacent cortical bone. At 4 weeks, the implant had turned almost entirely into bone. Cartilage differentiated in the bioreactor and facilitated healing when implanted into a defect. Engineering cartilage to replace bone is an alternative to current methods of bone grafting.