Demineralized bone matrix (DBM) has been successfully used as a substitute for bone grafting. Autogenous bone grafts (ABG) may cause donor site morbidity and undergo significant resorption. DBM may overcome these problems but is mechanically unstable when originally placed. We explored using a slowly resorbable template, polydioxanone (PDS), in combination with DBM and compared it to ABG in a rat 9 x 9 mm cranial defect model. After both 1 and 3 months, histologically and biochemically well-formed bone was present in ABG/PDS and DBM/PDS-treated defects, but not in control defects (PDS alone). Mechanical push-out tests using a servohydraulic testing frame were conducted. Maximum load before failure of DBM/PDS increased from 65% at 1 month to 100% of that of intact skull at 3 months. In contrast, ABG/PDS was 50% as strong as DBM/PDS and not significantly stronger than PDS alone. ABG/DBM did not significantly increase in strength from 1 to 3 months. We conclude that DBM/PDS is better than ABG/PDS in treating cranial defects in the rat model, and that an absorbable osteoinductive bone substitute with superior mechanical advantage is possible without the disadvantages of ABG.