Tissue-engineering strategies to stimulate bone regeneration may offer an alternative approach to conventional orthopaedic and maxillofacial surgical therapies. Over the last decade, significant advances have been accomplished in developing biomimetic matrices, growth factors, cell transplantation and gene delivery therapeutics to support new bone growth. However, it is not known if tissue-engineered bone recapitulates the biology of normal skeletal tissue in response to physiologic cues. Here, we report that bone formed by the differentiation of transplanted murine bone marrow stromal cells (BMSCs) responds to a systemically delivered calciotropic hormone. Ectopic ossicles in mice exposed to catabolic doses of parathyroid hormone (PTH) had increased numbers of tartrate-resistant acid phosphatase (TRAP)-positive osteoclasts as compared to control mice. In contrast, treatment with anabolic doses of PTH promoted a marked increase in trabecular bone mass as analyzed by microcomputed tomography and histomorphometry. Our findings demonstrate that bone formed from transplanted BMSCs is responsive to normal physiologic signals, and can be augmented by the addition of a systemic anabolic agent. Because multiple and distinct ossicles can be generated in a single animal, this versatile system may be used to: (a) elucidate cellular/molecular mechanisms in bone regeneration; (b) study cell-to-cell interactions in the bone marrow microenvironment in health and disease; and (c) evaluate the efficacy of osteotropic agents that modulate bone turnover in vivo.