The reconstruction of large defects (>10 mm) in humans usually relies on bone graft transplantation. Limiting factors include availability of graft material, comorbidity, and insufficient integration into the damaged bone. We compare the gold standard autograft with biodegradable composite scaffolds consisting of medical-grade polycaprolactone and tricalcium phosphate combined with autologous bone marrow-derived mesenchymal stem cells (MSCs) or recombinant human bone morphogenetic protein 7 (rhBMP-7). Critical-sized defects in sheep--a model closely resembling human bone formation and structure--were treated with autograft, rhBMP-7, or MSCs. Bridging was observed within 3 months for both the autograft and the rhBMP-7 treatment. After 12 months, biomechanical analysis and microcomputed tomography imaging showed significantly greater bone formation and superior strength for the biomaterial scaffolds loaded with rhBMP-7 compared to the autograft. Axial bone distribution was greater at the interfaces. With rhBMP-7, at 3 months, the radial bone distribution within the scaffolds was homogeneous. At 12 months, however, significantly more bone was found in the scaffold architecture, indicating bone remodeling. Scaffolds alone or with MSC inclusion did not induce levels of bone formation comparable to those of the autograft and rhBMP-7 groups. Applied clinically, this approach using rhBMP-7 could overcome autograft-associated limitations.