Abstract: Objective To evaluate the biocompatibility, degradation and bone formation activity of a new bone substitute for bone grafting, nacre/polylactic acid composite artificial bone (NPCB). Methods Radial bone defects 1.5 cm in length were induced in 32 New Zealand rabbits and immediately filled with NPCB or nothing. The animals’ local and whole body responses to the implants were observed after the operation, and the serum calcium levels were detected 1 week and 4 weeks postoperatively. Tissue response, new bone formation in the defects and degradation of the implants were evaluated by X-ray, and examination of the bone mineral content (BMC) in the defects and histomorphological analysis were performed after the rabbits were sacrificed. Results All the rabbits survived the operation and the incisions healed smoothly. No significant difference was noted in the serum calcium level between 1 day before operation, 1 week and 4 weeks postoperation. BMC in the defects of the rabbits with NPCB grafts increased more rapidly than that in the control group 6-12 weeks after the operation and began to decrease after 12 weeks. Gross, X-ray and histological observations revealed that NPCB possessed osteoconductive activity and new bone ingrowth in the implants was found during the whole experiment. At 16 weeks, the defects grafts were almost completely repaired with NPCB while the defects in the control group remained nonunion. Biodegradation of the implants was observed early at 6 weeks, with numerous macrophage and multinuclear giant cells containing phagocytosed NPCB particles around the implants at 12 weeks, but NPCB remnants were still visible at 16 weeks. Conclusion As a bone substitute, NPCB possesses good biocompatibility, biodegradability and osteoconductive activity.