Perfusion bioreactors have been an effective tool in bone tissue engineering. Improved nutrient delivery and the application of shear forces have stimulated osteoblast differentiation and matrix production, allowing for generation of large, clinically sized constructs. Differentiation of hypertrophic chondrocytes has been considered an alternative strategy for bone tissue engineering. We studied the effects of perfusion on hypertrophic chondrocyte differentiation, matrix production, and subsequent bone formation. Hypertrophic constructs were created by differentiation in chondrogenic medium (2 weeks) and maturation in hypertrophic medium (3 weeks). Bioreactors were customized to study a range of flow rates (0-1200 μm/s). During chondrogenic differentiation, increased flow rates correlated with cartilage matrix deposition and the presence of collagen type X. During induced hypertrophic maturation, increased flow rates correlated with bone template deposition and the increased secretion of chondroprotective cytokines. Following an 8-week implantation into the critical-size femoral defect in nude rats, nonperfused constructs displayed larger bone volume, more compact mineralized matrix, and better integration with the adjacent native bone. Therefore, although medium perfusion stimulated the formation of bone template in vitro, it failed to enhance bone regeneration in vivo. However, the promising results of the less developed template in the critical-sized defect warrant further investigation, beyond interstitial flow, into the specific environment needed to optimize hypertrophic chondrocyte-based constructs for bone repair.