Autogenous marrow-free bone shavings of dense lamellar bone spread over polyester mesh were transplanted into muscle, the palate and the tibia. A thin sheet of silastic was used to eliminate the induction effect of the adjacent bone, and the results were evaluated histologically. It was found that finely divided autogenous bone shavings actively induce new bone formation, and that the rate of bone production depends on the proximity of bone-competent tissue, such as a muscle tendon or a muscle attachment. Osteogenesis is also stimulated by a direct blood supply from the adjacent bone. Polyester mesh (Mersilene) is a relatively inert material, which could be used to great advantage in the transplantation of bone. Preliminary results of this research indicate that it may be of great value in bone reconstruction. These experiments support the idea of a non-cellular and diffusible bone stimulatory substance which influences the inducible osteogenic precursor cells to produce bone.