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The purpose of this study was to determine the chondrogenic potential of free intra-articular autografts of periosteum under the influence of joint immobilization compared with continuous passive motion. A graft of periosteum (including the cambium layer) was taken from the medial aspect of the proximal end of the tibia and transplanted into each corresponding knee joint in thirty adolescent New Zealand rabbits. A cast was applied to the left hind limb to immobilize the knee joint in a position of 40 degrees of flexion; the animal was then placed on the continuous passive-motion apparatus so that the right knee joint could be moved continuously and passively from 40 to 110 degrees of flexion. Fifteen rabbits were killed at intervals from seven to twenty-eight days and fifteen rabbits were killed at twenty-one days. The grafts in the immobilized limbs were small and soft, and did not resemble cartilage, whereas the grafts in the limbs that had been treated with continuous passive motion had grown much larger and had taken on the gross appearance of articular cartilage. After one week the cells in the cambium layer were rapidly proliferating and by two weeks there was consistent evidence of differentiation along a chondroid line in the grafts that had been exposed to continuous passive motion. After three weeks bone formation was apparent in all of the grafts, which had become adherent to the synovial tissue and vascularized. Cartilage was the predominant tissue in only 8 per cent of the grafts in the immobilized limbs, compared with 59 per cent of the grafts (p less than 0.01) in the limbs exposed to continuous passive motion. This investigation demonstrated the chondrogenic potential of free periosteal grafts in a synovial fluid environment and also the stimulating effect of continuous passive motion on periosteal neochondrogenesis.