In this paper, we review the progress toward developing strategies to engineer improved structural grafting of bone. Three strategies are typically used to augment massive bone defect repair. The first is to engraft mesenchymal stem cells (MSCs) onto a graft or a biosynthetic matrix to provide a viable osteoinductive scaffold material for segmental defect repair. The second strategy is to introduce critical factor(s), for example, bone morphogenetic proteins (BMPs), in the form of bone-derived or recombinant proteins onto the graft or matrix directly. The third strategy uses targeted delivery of therapeutic genes (using viral and nonviral vectors) that either transduce host cells in vivo or stably transduce cells in vitro for subsequent implantation in vivo. We developed a murine femoral model in which allografts can be revitalized via recombinant adeno-associated virus (rAAV) gene transfer. Specifically, allografts coated with rAAV expressing either the constitutively active BMP type I receptor Alk2 (caAlk2), or the angiogenic factor vascular endothelial growth factor (VEGF) combined with the osteoclastogenic factor receptor activator of NF-kappa B ligand (RANKL) have remarkable osteogenic, angiogenic, and remodeling effects that have not been previously documented in healing allografts. Using histomorphometric and micro computed tomography (muCT) imaging we show that rAAV-mediated delivery of caAlk2 induces significant osteoinduction manifested by a mineralized callus on the surface of the allograft, which resembles the healing response of an autograft. We also demonstrate that the rAAV-mediated gene transfer of the combination of VEGF and RANKL can induce significant vascularization and remodeling of processed structural allografts. By contrast, rAAV-LacZ coated allograft controls appeared similar to necrotic allografts and lacked significant mineralized callus, neovascularization, and remodeling. Therefore, innovations in gene delivery offer promising therapeutic approaches for tissue engineering of structural bone substitutes that can potentially have clinical applications in challenging indications.