The effects of cyclosporin A on the occurrence of neuroendocrine peptides in bone induced by demineralized allogeneic and xenogeneic bone matrix were studied in rats. Cyclosporin A enhanced bone induction in demineralized allogeneic bone matrix implants by 40% to 50% at 4 weeks, whereas there was no difference to the control group at 8 weeks. In demineralized xenogeneic bone matrix implants there was virtually no cartilage or bone formation at 4 weeks, but some bone and cartilage formation was seen at 8 weeks. In both cyclosporin A treated groups the net bone formation in demineralized xenogeneic bone matrix implants was increased four to five times at 4 weeks. Cyclosporin A treatment did not alter the temporal occurrence or distribution of neuropeptide containing nerve fibers in the bone induced by allogeneic bone matrix. Fibers containing substance P, calcitonin gene related peptide, neuropeptide Y, vasoactive intestinal peptide, and tyrosine hydroxylase were detected in the ossicles of cyclosporin A treated and control rats. In the xenogeneic bone matrix of the control group, no immunoreactive nerve fibers could be detected at 4 weeks, but at 8 weeks all five neuropeptides were detected. However, after cyclosporin A treatment immunoreactive nerve fibers could be seen at 4 weeks in the demineralized xenogeneic bone matrix implants. Thus, immunologic properties of the inductive matrix affect the yield of mineralized bone and the degree of innervation. Cyclosporin A decreases the immune response and enhances the formation of bone and the number of transmitter identified nerves in demineralized xenogeneic bone matrix induced ossicles.