Periosteal grafts can aid in bone repair by providing bone progenitor cells and acting as a barrier to scar tissue. Unfortunately, these grafts have many of the same disadvantages as bone grafts (donor site morbidity and limited donor sites). In this article, we describe a method of synthesizing a periosteum-like material using acellular human dermis and osteoblasts or mesenchymal stem cells (MSC). We show that osteoblasts readily attach to and proliferate on the acellular human dermis in vitro. In addition, osteoblasts retained the potential for differentiation in response to bone morphogenetic protein stimulation. Cells grown on the acellular human dermis were efficiently transfected with adenoviruses with no evidence of cellular toxicity. To assess for in vivo cell delivery and bone-forming potential, the acellular human dermis was seeded with green fluorescent protein (GFP)-positive MSCs, transfected with bone morphogenetic protein 2, wrapped around the adductor muscle in syngeneic mice, and used to treat critical-sized mandibular defects in nude rats. After 3 weeks, GFP-positive cells were still present, and bone had replaced the interface between the muscle and the constructs. After 6 weeks, critical-sized bone defects had been successfully healed. In conclusion, we show that an acellular human dermis can be used to synthesize a tissue-engineered periosteum capable of delivering cells and osteoinductive proteins.