Background: The purpose of the present study was to create an effective bone-graft substitute for the treatment of a diaphyseal nonunion.Methods: A standardized nonunion was established in the midportion of the radial diaphysis in thirty mongrel dogs by creating a three-millimeter segmental bone defect (at least 2 percent of the total length of the bone). The nonunion was treated with implantation of a carrier comprised of poly(DL-lactic acid) and polyglycolic acid copolymer (50:50 polylactic acid-polyglycolic acid [PLG50]) containing canine purified bone morphogenetic protein (BMP) or recombinant human transforming growth factor-ß (TGF-ß1), or both, or the carrier without BMP or TGF-ß1. Five groups, consisting of six dogs each, were treated with implantation of the carrier alone, implantation of the carrier with fifteen milligrams of BMP, implantation of the carrier with 1.5 milligrams of BMP, implantation of the carrier with fifteen milligrams of BMP and ten nanograms of TGF-ß1, or implantation of the carrier with ten nanograms of TGF-ß1. At twelve weeks after implantation, the radii were examined radiographically and the sites of nonunion were examined histomorphometrically.Results: We found that implantation of the polylactic acid-polyglycolic acid carrier alone or in combination with ten nanograms of TGF-ß1 failed to induce significant radiographic or histomorphometric evidence of healing at the site of the nonunion. The radii treated with the carrier enriched with either 1.5 or fifteen milligrams of BMP showed significantly increased periosteal and endosteal bone formation on histomorphometric (p < 0.05) and radiographic (p < 0.02) analysis.Conclusions: Bone formation in a persistent osseous defect that is similar to an ununited diaphyseal fracture is increased when species-specific BMP incorporated into a polylactic acid-polyglycolic acid carrier is implanted at the site of the nonunion. TGF-ß1 at a dose of ten nanograms per implant did not induce a similar degree of bone formation or potentiate the effect of BMP in this model.Clinical Relevance: The biodegradable implant containing BMP that was used in the present study to treat diaphyseal nonunion is an effective bone-graft substitute.