Implantation of mineral-containing bone fragments into calvarial defects in rats initiates a rapid and reproducible resorption of the bone matrix. After 7 days, a dense tissue develops with mononucleated as well as multinucleated cells surrounding and between the bone fragments. Electron microscopy revealed that these cells belong to the mononuclear phagocytic system: they were identified as macrophages, epithelioid cells, foreign body giant cells, and Langerhans cells. In addition to the common ultrastructural characteristics, these cells had electron-dense, focal specializations along their cell membrane with a coating on the exterior, corresponding to subplasmalemmal linear densities. Small, unidentified cells with electron-dense ground cytoplasm were often seen in close proximity to more differentiated cells. No halisteresis had occurred on the surfaces of the bone fragments. Indentations resembling Howship's lacunae were frequent; these contained mononucleated as well as multinucleated cells. Some surfaces were frayed and collagen fibers were exposed, but the cells apposed to these surfaces did not have ruffled borders as are seen in osteoclasts. Some bone fragments were broken up and cell processes had penetrated deep into the cracks, separating pieces of matrix. Small matrix particles were phagocytosed by macrophages, but not by epithelioid cells or giant cells. It appears that enzymes capable of degrading bone matrix components were secreted by the more differentiated cells of the mononuclear phagocytic system. They eroded the bone surface in a way reminiscent of osteoclastic bone resorption. They also entered the canaliculi to act from within the bone fragment, a process possible only in dead bone. We suggest a possible relationship of these cells with osteoclasts.