The biocompatibility and osteogenic activity of allogenic decalcified bone matrix (DBM) used as a carrier for bone tissue engineering were studied. Following the method described by Urist, allogenic DBM was made. In vitro, DBM and bone marrow stromal cell (BMSC) from rabbits were co-cultured for 3-7 days and subjected to HE staining, and a series of histomorphological observations were performed under phase-contrast microscopy and scanning electron microscopy (SEM). In vivo the mixture of DBM/BMSC co-cultured for 3 days was planted into one side of muscules sacrospinalis of rabbits, and the DBM without BMSC was planted into other side as control. Specimens were collected at postoperative week 1, 2 and 4, and subjected to HE staining, and observed under SEM. The results showed during culture in vitro, the BMSCs adherent to the wall of DBM grew, proliferated and had secretive activity. The in vivo experiment revealed that BMSCs and undifferentiated mesenchymal cells in the perivascular region invaded gradually and proliferated together in DBM/BMSC group, and colony-forming units of chondrocytes were found. Osteoblasts, trabecular bone and medullary cavity appeared. The inflammatory reaction around muscles almost disappeared at the second weeks. In pure DBM group, the similar changes appeared from the surface of the DBM to center, and the volume of total regenerate bones was less than the DBM/BMSC group at the same time. The results indicated that the mixture of DBM and BMSC had good biocompatibility and ectopic induced osteogenic activity.