Although bone wax is effective at achieving hemostasis, it is nonresorbable, causes a foreign body reaction, and inhibits osteogenesis. We report development of a polyethylene glycol/microfibrillar collagen composite (PEG/MFC) that has inherent hemostatic qualities, is biodegradable, and is compatible with bone repair. PEG/MFC composite (n = 42) was placed in 5 mm cranial defects in New Zealand white rabbits. Hemostasis and healing were compared to unfilled defects (n = 32) and defects filled with standard bone wax (n = 10). Both PEG/MFC and bone wax handled well and stopped bleeding. The polyethylene glycol component was resorbed by 8 h, and the microfibrillar collagen was resorbed over 2 months, eliciting only a minor inflammatory response during the first month. Defects filled with the PEG/MFC composite showed similar amounts of bony regeneration as did unfilled control defects. At 4 weeks, healing bone accounted for 43 +/- 13% in those treated with PEG/MFC and 47 +/- 19% defect area in untreated holes. In contrast, less than 1% of the area was bone in defects filled with bone wax (p < 0.05). PEG/MFC composite provided excellent bony hemostasis and did not inhibit bone growth.