Objective The purpose of this study is to explore the growth, differentiation and osteogeneration of bone marrow stromal cells (BMSCs) on partially demineralized bone matrix (pDBM) and to generate bone tissue by tissue engineering approach in vivo. Methods Demineralized bone was processed from femur head of Shanghai white swine. Calcium content, porosity and pore size was measured respectively. In vitro osteogenic differentiated human BMSCs of passage 3 were seeded in pDBM. Adhesive rate of cells to pDBM was calculated 24hours after seeding. Distribution, growth and proliferation of BMSCs on pDBM were observed with fluorescent DiI labeling. Matrix disposition was analyzed with SEM observation. Cell-material complex was implanted subcutaneously in nude mice. The implants were harvested at 8, 12 weeks post surgery and samples were observed by H&E staining. Results BMSCs adhered well on the material and the distribution of cells was uniform. The adhesive rate is 99.1%±1%. New bone formation was observed in implant of 8, 12 weeks respectively. The newly formed bone was generated on the surface of the residual material and a layer of cells with typical characteristic of osteoblast was observed to adhere on the surface of the new bone. Conclusion With good biocompatibility to hBMSCs, pDBM could serve as ideal scaffold for bone tissue engineering both in vitro and in vivo.