Immune cells and their soluble factors regulate skeletal cells during normal bone regeneration and pathological bone formation. Bacterial infections can trigger immune responses that activate pro-osteogenic pathways, but these are usually overshadowed by osteolysis and concerns of systemic inflammation. The aim of this study was to determine whether the transient local inflammatory reaction to non-viable bacterial immune agonists could lead to favourable new bone formation. In a series of rabbit studies, as proof-of-concept, how tibial intramedullary injection of viable or killed bacterial species affected bone remodelling and new bone formation was determined. Application of killed bacteria led to considerable new bone formation after 4 weeks, without the prolonged systemic inflammation and exaggerated bone lysis seen with active infection. The osteo-immunomodulatory effects of various species of killed bacteria and the dose response relationship were subsequently screened in ectopically-implanted ceramic scaffolds. Histomorphometry after 8 weeks showed that a relatively low dose of killed bacteria enhanced ectopic bone induction. Moreover, lipoteichoic acid - the bacterial cell-wall derived toll-like-receptor (TLR)-2 activator - was identified as an osteo-stimulatory factor. Collectively, the data indicated that bacterial stimuli could be harnessed to stimulate osteogenesis, which occurs through a synergy with osteoinductive signals. This finding holds promise for the use of non-viable bacteria, bacterial antigens, or their simplified analogues as immuno-modulatory bone regenerating tools in bone biomaterials.