We developed a reproducible, relatively rapid bioassay that quantitatively correlates with the osteoinductive capacity of demineralized bone matrix obtained from human long bones. We have found that Saos human osteosarcoma cells proliferate in response to incubation with demineralized bone matrix and that an index of this proliferative activity correlates with demineralized bone matrix-induced osteogenesis in vivo. The bioassay (Saos cell proliferation) had an interassay coefficient of variation of 23±2% and an intra-assay coefficient of 11±1%. Cell proliferation was normalized to a standard sample of demineralized bone matrix with a clinically high osteoinductive capacity, which was assigned a value of one. The Saos cell proliferation for each sample was related to the standard and assigned a value placing it into the low (0.00-0.39), intermediate (0.40-0.69), or high (0.70-1.49) osteoinductive index group. Osteoinduction of human demineralized bone matrix was quantitated by expressing new bone formation as a function of the total bone volume (new bone plus the demineralized bone powder). The demineralized bone matrix was placed in pouches formed in the rectus abdominis muscles of athymic rats, and endochondral bone formation was assessed at 35 days following implantation, when marrow spaces in the ossicles were formed by new bone bridging the spaces between demineralized bone matrix particles. The proliferative index correlated with the area of new bone formation in histological sections of the newly formed ossicles. When the proliferative index (the osteoinductive index) was divided into low, intermediate, and high groups, the correlation between it and new bone formation (osteoinduction) was 0.850 (p<0.0005) in 25 samples of demineralized bone matrix. There was no overlap in the osteoinduction stimulated between the samples with low and high osteoinductive indices. We conclude that the proliferation assay is useful for the routine screening of bone allograft donors for osteoinductive potential. Furthermore, the two-dimensional area of new bone formation, as it relates to total new bone area, is a quantitative measure of osteoinduction.