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Currently available options for the repair of bony defects have substantial limitations. Much work has looked to the possibility of engineering bone using stem cells. These tissue-engineering efforts have focused on calvarial defect models, which have the advantages of minimal load-bearing and a large surface area. This study aims to solve the somewhat more challenging problem of repairing segmental bony defects such as those of the mandible and long bones. Four groups of decellularized bone tubes with cortical perforations were implanted subcutaneously in a rabbit model: empty bone tubes, bone tubes containing fibrin glue alone, bone tubes containing fibrin glue and freshly isolated autologous adipose-derived stem cells (ASCs), and bone tubes containing fibrin glue and predifferentiated autologous ASCs. Results showed a foreign body response characterized by fibrous capsule formation with minimal angiogenesis and no evidence of osteoblastic activity. Substantial changes are needed if this model is to become viable.