Bone regeneration is one of the major focus points in the field of regenerative medicine. A well-known stimulus of bone formation is bone morphogenetic protein-2 (BMP-2), which has already been extensively used in clinical applications. We investigated the possibility of achieving osteogenic differentiation bothin vitroandin vivoas a result of prolonged presence of BMP-2 using plasmid DNA-based gene therapy. By delivering BMP-2 cDNA in an alginate hydrogel, a versatile formulation is developed. High transfection efficiencies of up to 95% were obtained in both human multipotent stromal cells (MSCs) and MG-63 cells using naked DNA in vitro. Over a period of 5 weeks, an increasing amount of biologically active BMP-2 was released from the cells and remained present in the gel. In vivo, transfected cells were found after both two and six weeks implantation in naked mice, even in groups without seeded cells, thus indicatingin vivotransfection of endogenous cells. The protein levels were effective in inducing osteogenic differentiationin vitro, as seen by elevated alkaline phosphatase (ALP) production andin vivo, as demonstrated by the production of collagen I and osteocalcin in a mineralised alginate matrix.