To determine whether grafted young periosteum can induce new bone formation in elderly patients, this preliminary study evaluated cell proliferation and differentiation in xenogeneic periosteal grafts in old rats radiographically, histologically, and immunohistochemically. Periosteum harvested from the tibia of young Japanese white rabbits were grafted into old Sprague-Dawley rats with or without administration of 1.0 mg per kilogram per day immunosuppressant FK506. Autogenous old periosteal tissue grafts were also evaluated as a control. Grafted tissue was extirpated after 7, 14, 21, and 45 days. In the xenogeneic group, proliferative cell nuclear antigen-positive cells were observed 7 days after surgery, which differentiated into chondroblasts with bone morphogenetic protein-2 expression and finally formed cartilage by 14 days. Endochondral ossification was observed at 21 days, and bone replacement was completed by 45 days. No osteogenic cell activity was observed in the two other groups. Xenogeneic young periosteum thus maintained its osteogenic/chondrogenic potentiality in older rats.