OBJECTIVE To improve the osteoinduction of coral and provide a perfect bone graft substitute for clinical bone defects. METHODS By combining coral with collagen and recombinant human bone morphogenetic protein-2(rhBMP-2), coral/collagen/rhBMP-2 composite was obtained. The composite was implanted into the back muscle pouches of mice, and coral/collagen or coral/rhBMP-2 were implanted as control. The osteoinduction of the composite was assessed by histology and image analysis system. RESULTS The chondrocyte differentiation and matrix formation were observed in local sites after one week, lamellar bone with bone marrow were formed after 4 weeks, and coral were absorbed partially. The quantity of osteoinduction was time-related and rhBMP-2 dose-related(P lt; 0.01). Coral/collagen and coral/rhBMP-2 implants did not show any bone or cartilage formation. CONCLUSION The coral/collagen/rhBMP-2 composite possesses a superior osteoinduction and will be a new type of bone substitute to be used in orthopedic and maxillofacial surgery.