Interfragmentary displacement has a main effect on callus formation in fracture healing. To test whether compressive or distractive displacements have a more pronounced effect on new bone formation, a sheep osteotomy model was created whereby the gap tissue was subjected to constant bending displacement. A diaphyseal osteotomy with a gap of 2 mm was created in 18 sheep tibiae and stabilized with a special unilateral actuator-driven external fixator. Two experimental groups with six sheep each received either 10 or 1000 cycles evenly distributed over 24 h. The third group of six sheep served as a control group without actively induced displacement. The amount and direction of cyclic displacement was kept constant throughout the observation period, resulting in 50% compressive and 50% distractive displacement within the osteotomy gap. At sacrifice, six weeks after surgery, bending stiffness was measured and new bone formation was assessed radiologically and microradiographically. In all cycled groups, the amount of periosteal callus formation was up to 25 times greater on the compression compared to the distraction side (p < 0.001). The application of the higher number of daily cycles resulted in an up to 10-fold greater amount of periosteal new bone formation on the compression side (p < 0.012), while the difference on the distraction side was not significant. Ten cycles applied a day were sufficient to create an abundant periosteal callus on the compression side. In the 1000 cycle group, bending stiffness revealed slightly lower values but the difference was not significant. Solid periosteal bridging of the gap was observed in two sheep in the control group, whereas bridging in the cycled groups was observed exclusively at the medullary side. In conclusion, cyclic compressive displacements were found to be superior over distractive displacements. A higher number of enforced and maintained compressive displacements enhanced periosteal callus formation but did not allow bony bridging of the gap.