Glucocorticoids inhibit bone remodeling and fracture healing. We sought to determine whether osteogenic protein 1 (OP-1) can overcome this inhibition in a closed fracture model in the rat. Time-released prednisolone or placebo pellets were implanted subcutaneously; closed femoral fractures were created 2 weeks later in rats. Fractures received sham, OP-1 and collagen, or collagen-only implants. Femurs were harvested at 3, 10, 21, 28, and 42 days postfracture. Fractures were examined radiographically for amount of hard callus; mechanically for torque and stiffness (also expressed as a percentage of the contralateral intact femur); and histomorphometrically for amount of cartilaginous and noncartilaginous soft callus, hard callus, and total callus. Glucocorticoid administration inhibited fracture healing. The application of a devitalized Type I collagen matrix mitigated the inhibitory effects of prednisolone on fracture healing However, further increases in indices of fracture healing were observed when OP-1 was added to the collagen matrix compared with collagen alone. OP-1 and collagen was more effective than collagen alone.