Introduction The induced membrane technique (IMT), frequently called Masquelet technique, is an operative, two-staged technique for treatment of segmental bone loss. Previous studies mainly focused on radiological outcome parameters and complication rates, while functional outcomes and health-related quality of life after the IMT were sparsely reported. Materials and methods Retrospective study containing of a chart review as well as a clinical and radiological follow-up examination of all patients treated with the IMT at a single institution. The clinical outcomes were evaluated using the Lower Extremity Functional Scale (LEFS), the Short-Form-36 (SF-36) and the visual analog scale (VAS) for pain. The radiographic evaluation contained of standard anteroposterior and lateral, as well as hip-knee-ankle (HKA) radiographs. Results Seventeen patients were included in the study. All had suffered high-energy trauma and sustained additional injuries. Ten bone defects were localized in the femur and seven in the tibia. Ten patients underwent additional operative procedures after IMT stage 2, among them three patients who contracted a postoperative deep infection. The median LEFS was 59 (15–80), and the SF-36 physical component summary (PCS) and mental component summary (MCS) were 41.3 (24.0–56.1) and 56.3 (13.5–66.2), respectively. The median length of the bone defect was 9 (3–15) cm. In 11 patients, union was obtained directly after IMT stage 2. Bone resorption was observed in two patients. At follow-up, 16 of the 17 bone defects had healed. The median follow-up was 59 months (13–177). Conclusion Our results show a high occurrence of complications after IMT stage 2 in segmental bone defects of femur and tibia requiring additional operative procedures. However, fair functional outcomes as well as a good union rate were observed at follow-up.