Considerable research has been focused on the use of bone marrow-derived mesenchymal stem cells (MSCs) for the repair of non-unions and bone defects. To date, the question of whether transplanted MSCs survive and engraft within newly formed tissue remains unresolved. The development of an easy and reliable method that would allow cell fate monitoring in transplant recipients is a pressing concern for the field of tissue engineering. To demonstrate the presence of transplanted cells in newly formed bone, we established a xenograft nude rat model allowing the detection of murine LacZ MSCs in vivo. MSCs were isolated from transgenic lacZ mice, seeded onto bioabsorbable collagen sponges, and transplanted to repair a calvarial defect in nude rats. As a preliminary step, the histological procedure was adapted to optimize the detection of LacZ cells in bone tissue embedded in methylmethacrylate (MMA). Four fixatives and four fixation times were evaluated. Among all the fixatives tested, 2% formaldehyde/0.2% glutaraldehyde at 4C for 4 days gave the best results for X-gal staining at pH 7.4 on both cell cultures and bone explants. All fixatives were effective for immunodetection of beta-gal. In the chimeric LacZ/nude rat animal model, MSCs were detected in vivo for up to 4 weeks after implantation and contributed to the repair and the neovascularization of the bone defect. LacZ is a suitable phenotypic marker to track MSCs in skeletal tissues embedded in MMA.