We aimed to introduce an in vivo bioreactor-vascular pedicle threaded through the central portion of a scaffold in which a vascularized bone graft was prefabricated using adenoviral human BMP-2 gene (AdBMP2)-modified bone marrow mesenchymal stem cells (BMSCs), beta tricalcium phosphate (β-TCP), a vessel bundle, and muscularis membrane(group A). As controls, Adβgal-BMSCs/β-TCP granules, vessel bundle, and the muscularis membrane (group B); BMSCs/β-TCP granules, vessel bundle, and muscularis membrane (group C); and β-TCP granules, vessel bundle, and muscularis membrane (group D) were prepared. Formation of bone tissue and a vascular network was assessed by microangiography and histological methods 4 weeks after prefabrication. New cartilage and bone tissue in the space between β-TCP granules (mainly endochondral bone) were confirmed by histology, and a de novo vascular network circulating from the vessel bundle through newly formed bone tissue was observed in group A. Formation of bone or cartilage was not observed in the control groups. We concluded that the in vivo bioreactor is a promising method for prefabrication of vascularized functional bone.