The long-term goal of this proposal is to develop an effective therapy to repair bony defects in the craniofacial skeleton employing adult stem cells derived from adipose tissue. Reconstructive surgery for developmental anomalies, trauma and resection following tumor removal requires materials to replace or induce the regeneration of bone. Currently applied methods, such as use of autologous grafts and banked bone, are limited in efficacy and carry the risk of donor site morbidity and infection. Tissue engineering of replacement bone lacks the limitations of current approaches while offering distinct advantages. Adipose-derived adult stem cells (ADASC) are easily isolated and can be induced to differentiate ex vivo into a variety of neural and mesodermal cell lineages including osteoprogenitors. The central hypothesis of this study is that ADASCs can be maintained as replicating multipotent stem cells, which can be induced to differentiate into osteoblasts in vitro and, when delivered appropriately, will repair bony defects in vivo. Two Specific Aims are proposed to test the hypothesis: 1) to characterize and optimize the isolation, growth and differentiation of ADASCs in vitro; and 2) to test the capacity of human ADASCs to mediate repair of critical-sized bone defects in the skulls of athymic rats. In Aim 1 the clonal nature of the osteoprogenitor population within the total ADASC isolate and the timing of expression of bone specific genes will be determined. Using early and late markers of osteogenic differentiation, conditions for differentiation will be optimized and compared with primary human osteoblasts and osteoprogenitors derived from a human embryonic stem cell line. In Aim 2, ADASCs will be delivered in collagen sponges. Then de novo bone formation will be measured by three-dimensional reconstruction of computed tomography (3DCT) at intervals over the healing process to determine the optimal cell and passage number, stage of differentiation, and seeding density for bone repair. These studies should indicate the potential of the ADASC to contribute to bony tissue engineering and are a prerequisite to testing of the many tissue scaffold systems being developed and methods for using stem cells as gene delivery vehicles. The characterization studies may also provide the basis to use this stem cell system as a model for study of osteogenic differentiation.