This study was conducted to provide further evidence of the inherent osteogenic potential of the fracture hematoma. The fracture hematoma was separated into its cellular and extracellular elements. The hematoma cells were cultured to study bone formation by the cellular elements alone. Bone formation acceleration factor was added to the cultured fracture hematoma cells. The cell responded to this stimulation by differentiation into chondrocytes. Fracture hematoma was freeze-dried to study the presence of osteoinduction by the extracellular factors in the fracture hematoma. The freeze-dried fracture hematoma was packaged in methylmethacrylate pellets and within capsules of hydroxyapatite. These pellets and capsules in response to extracellular humoral factors from the freeze-dried fracture hematoma. The results of experimental implantation of the cultured fracture hematoma cells revealed that these cells had the potential to differentiate into chondroblasts or osteoblasts when bone induction factors and bone acceleration factor was added to their media. These extracellular humoral factors are known to be present in the fracture hematoma.