Femtosecond laser pulses can be used to perform very precise cutting of material, including biological samples from subcellular organelles to large areas of bone, through plasma-mediated ablation. The use of a kilohertz regenerative amplifier is usually needed to obtain the pulse energy required for ablation. This work investigates a 5 megahertz compact fiber laser for near-video rate imaging and ablation in bone. After optimization of ablation efficiency and reduction in autofluorescence, the system is demonstrated for the in vivo study of bone regeneration. Image-guided creation of a bone defect and longitudinal evaluation of cellular injury response in the defect provides insight into the bone regeneration process.