BACKGROUND: Tissue engineering techniques combined with gene therapy have been recently used to improve osteogenesis. NEL-like molecule-1 (Nell-1), a novel growth factor, has been reported to have specificity for osteochondral lineage. The study assessed the osteogenic differentiation of rat bone marrow stromal cells (bMSCs) after Nell-1 gene modification and examined its ectopic bone formation ability in a nude mice model with tissue engineering technique. METHODS: bMSCs obtained from Fischer 344 rats were transduced with either AdNell-1 (Nell-1 group) or Ad-beta-galactosidase (AdLacZ, LacZ group) or left untransduced (untransduced group). The expression of Nell-1 protein was determined by Western blotting and transfer efficiency was assessed. mRNA expressions of osteopontin (OP), bone sialoprotein (BSP) and osteocalcin (OC) were assessed by real-time PCR 0, 3, 7, 14, and 21 days after gene transfer. Alkaline phosphatase (ALP) activity was measured and von Kossa test was also conducted. Finally, with a tissue engineering technique, gene transduced bMSCs, combining with beta-tricalcium phosphate (beta-TCP) at a concentration of 2 x 10(7) cells/ml, were implanted at subcutaneous sites on the back of nude mice. Four weeks after surgery, the implants were evaluated with histological staining and computerized analysis of new bone formation. RESULTS: Under current transduction conditions, gene transfer efficiency reached (57.9 +/- 6.8)%. Nell-1 protein was detected in Nell-1 group but not in untransduced group and LacZ group. Induced by Nell-1, BSP and OP expression were increased at intermediate stage and OC expression was increased at later stage. ALP activity and the number of calcium nodules were highest in Nell-1 group. Four weeks after implanted into nude mice subcutaneously, the percentage of new bone area in Nell-1 group was (18.1 +/- 5.0)%, significantly higher than those of untransduced group (11.3 +/- 3.2)% and LacZ group (12.3 +/- 3.1)% (P < 0.05). CONCLUSIONS: This study has demonstrated the ability of Nell-1 to induce osteogenic differentiation of rat bMSCs in vitro and to enhance bone formation with a tissue engineering technique. The results suggest that Nell-1 may be a potential osteogenic gene to be used in bone tissue engineering.