Biomaterial research and tissue engineering have guided new developments in bone replacement. In this study, the osteoconductive and osteoinductive properties of 45S5 Bioglass (Novabone-C/M, Porex Surg., Newnan, GA), granules as a bone replacement material for large calvarial defects were evaluated. Rabbit periosteal cells were expanded in culture and used in vivo. Alkaline-phosphatase assay, collagen type I, and calcium expression were applied to confirm osteoblast phenotype. In the in vivo phase, a 15-mm diameter critical size calvarial defect was created in rabbits (n = 14). The defect was reconstructed according to four treatment groups: autogenous bone (n = 2), Bioglass alone (n = 2), Bioglass + bone (n = 5), Bioglass + periosteal cells (n = 5). The animals were killed 12 weeks after surgery, and the samples were analyzed. Periosteal cells grew successfully in vitro. Because of their fast proliferation and potential to differentiate into osteoblasts, they were an excellent source of cells for bone tissue engineering. The best ossification was seen when autogenous bone was used (79.4% ossified), whereas only 8.2% of the defect in the Bioglass group showed ossification. Addition of bone or cells to the Bioglass increased the area of ossification to 42.7% and 30.2%, respectively. Defects replaced with Bioglass showed varying degrees of inflammatory reaction because of the intense cell-mediated biodegradation process. Based on these findings, the use of Bioglass granules to repair large craniofacial defects cannot be advised.