Abstract Background Common cell based strategies for the treatment of osseous defects require the isolation and expansion of autologous cells. Since this makes such approaches time-consuming and expensive, we developed a novel expedited technology creating gene activated muscle grafts. We have previously shown that large segmental bone defects in rats can be regenerated by implantation of muscle tissue fragments activated by BMP-2 gene transfer. Results In the present study, we compared the bone healing capacities of such gene activated muscle grafts with bone isografts, mimicking autologous bone grafting, the clinical gold standard for treatment of bone defects in patients. Two of 14 male, syngeneic Fischer 344 rats used for this experiment served as donors for muscle and bone. Muscle tissue was harvested from both hind limbs and incubated with an adenoviral vector carrying the cDNA encoding BMP-2. Bone was harvested from the iliac crest and long bone epiphyses. Bone defects (5 mm) were created in the right femora of 12 rats and were filled with either BMP-2 activated muscle tissue or bone grafts. After eight weeks, femora were evaluated by radiographs, micro-computed tomography (μCT), and biomechanical testing. In the group receiving BMP-2 activated muscle grafts as well as in the bone-grafting group, 100% of the bone defects were healed, as documented by radiographs and μCT-imaging. Bone volume was similar in both groups and biomechanical stability of the two groups was statistically indistinguishable. Conclusions This study demonstrates that treatment of large bone defects by implantation of BMP-2 gene activated muscle tissue leads to similar bone volume and stability as bone isografts, mimicking autologous bone grafting.