We report a novel technology for the rapid healing of large osseous and chondral defects, based upon the genetic modification of autologous skeletal muscle and fat grafts. These tissues were selected because they not only possess mesenchymal progenitor cells and scaffolding properties, but also can be biopsied, genetically modified and returned to the patient in a single operative session. First generation adenovirus vector carrying cDNA encoding human bone morphogenetic protein-2 (Ad.BMP-2) was used for gene transfer to biopsies of muscle and fat. To assess bone healing, the genetically modified ("gene activated") tissues were implanted into 5mm-long critical size, mid-diaphyseal, stabilized defects in the femora of Fischer rats. Unlike control defects, those receiving gene-activated muscle underwent rapid healing, with evidence of radiologic bridging as early as 10 days after implantation and restoration of full mechanical strength by 8 weeks. Histologic analysis suggests that the grafts rapidly differentiated into cartilage, followed by efficient endochondral ossification. Fluorescence in situ hybridization detection of Y-chromosomes following the transfer of male donor muscle into female rats demonstrated that at least some of the osteoblasts of the healed bone were derived from donor muscle. Gene activated fat also healed critical sized defects, but less quickly than muscle and with more variability. Anti-adenovirus antibodies were not detected. Pilot studies in a rabbit osteochondral defect model demonstrated the promise of this technology for healing cartilage defects. Further development of these methods should provide ways to heal bone and cartilage more expeditiously, and at lower cost, than is presently possible.