The potential of mesenchymal stem cells (MSC) in tissue regeneration is increasingly gaining attention. There is now accumulating evidence that MSC make an important contribution to postnatal vasculogenesis. During bone development and fracture healing, vascularization is observed before bone formation. The present study determined the potential of MSC, transduced ex vivo with a recombinant adeno-associated virus 6 (rAAV6) encoding bone morphogenetic protein 2 (BMP2) and vascular endothelial growth factor (VEGF) in a mouse model of segmental bone defect created in the tibiae of athymic nude mice. Mouse MSC that were mock-transduced or transduced with rAAV6-BMP2:VEGF were systemically transplanted following radiographic confirmation of the osteotomy. Effects of the therapy were determined by enzyme-linked immunosorbent assay measurements for BMP2 and VEGF, dual-energy X-ray absorptiometry (DXA) for bone density, three-dimensional microcomputed tomography (νCT) for bone and capillary architecture, and histomorphometry for bone remodeling. Results of these analyses indicated enhanced bone formation in the group that received BMP2VEGF-expressing MSC compared to other groups. The therapeutic effects were accompanied by increased vascularity and osteoblastogenesis, indicating its potential for effective use while treating difficult nonunion bone defects in humans. © The American Society of Gene & Cell Therapy.