Treatment of large defects requires the harvest of fresh living bone from the iliac crest. Harvest of this limited supply of bone is accompanied by extreme pain and morbidity. This has prompted the exploration of other alternatives to generate new bone using traditional principles of tissue engineering, wherein harvested cells are combined with porous scaffolds and stimulated with exogenous mitogens and morphogens in vitro and/or in vivo. We now show that large volumes of bone can be engineered in a predictable manner, without the need for cell transplantation and growth factor administration. The crux of the approach lies in the deliberate creation and manipulation of an artificial space (bioreactor) between the tibia and the periosteum, a mesenchymal layer rich in pluripotent cells, in such a way that the body's healing mechanism is leveraged in the engineering of neotissue. Using the "in vivo bioreactor" in New Zealand White rabbits, we have engineered bone that is biomechanically identical to native bone. The neobone formation followed predominantly an intramembraneous path, with woven bone matrix subsequently maturing into fully mineralized compact bone exhibiting all of the histological markers and mechanical properties of native bone. We harvested the bone after 6 weeks and transplanted it into contralateral tibial defects, resulting in complete integration after 6 weeks with no apparent morbidity at the donor site. Furthermore, in a proof-of-principle study, we have shown that by inhibiting angiogenesis and promoting a more hypoxic environment within the "in vivo bioreactor space," cartilage formation can be exclusively promoted.