The gold standard treatment of large segmental bone defects is autologous bone transfer, which suffers from low availability and additional morbidity. Tissue engineered bone able to engraft orthotopically and a suitable animal model for pre-clinical testing are direly needed. This study aimed to evaluate engraftment of tissue-engineered bone with different prevascularization strategies in a novel segmental defect model in the rabbit humerus. Decellularized bone matrix (Tutobone) seeded with bone marrow mesenchymal stromal cells was used directly orthotopically or combined with a vessel and inserted immediately (1-step) or only after six weeks of subcutaneous "incubation" (2-step). After 12 weeks, histological and radiological assessment was performed. Variable callus formation was observed. No bone formation or remodeling of the graft through TRAP positive osteoclasts could be detected. Instead, a variable amount of necrotic tissue formed. Although necrotic area correlated significantly with amount of vessels and the 2-step strategy had significantly more vessels than the 1-step strategy, no significant reduction of necrotic area was found. In conclusion, the animal model developed here represents a highly challenging situation, for which a suitable engineered bone graft with better prevascularization, better resorbability and higher osteogenicity has yet to be developed.