To evaluate the ability of cultured mesenchymal stem cells (MSC) to repair physical defects, MSC-matrix constructs with 5% gelatin (group A), 10% gelatin/Gelfoam (Pharmacia, Peapack, NJ) (group B), and MSC grown in the presence of TGF-beta(3) with Gelfoam (group C) were implanted in proximal tibial physical defects created in 20 immature rabbits. Control groups (untreated partial defect and partial defect treated with Gelfoam) showed bony bar formation with varus deformities of 30degrees and 28degrees, respectively. Group A had an average 23degrees varus deformity with bony bridge formation, and group B had mild varus angulation (average 14degrees) of the proximal tibia. In group C, there was no significant varus deformity (average 9degrees), and histologic examination showed that some of the columnation areas interspersed with chondrocytes were irregularly arranged in the matrix. These findings suggest that repair of physical defects can be enhanced by the implantation of MSC cultured with TGF-beta(3)., (C) 2004 Orthopaedic Research Society. Published by Elsevier Ltd. All rights reserved.