Background While attempting to restore bone stock, impaction bone grafting employed during revision joint surgery may result in slow and limited allograft incorporation into host bone. A new approach including gene-modified bone marrow stromal cells (BMSCs) in combination with impaction bone grafting may effectively restore bone stock and improve allograft incorporation. This study aimed to investigate the effect of impaction on gene-modified BMSCs seeded on granular bone allografts in vitro and in vivo.Methods Deep-frozen, granular, cancellous bone allografts from canines were prepared to serve as cell delivery scaffolds and were seeded with green fluorescent protein (GFP) genetically-modified BMSCs to construct cell-allograft composites. The composites were impacted in a simulative, in vitro impaction model and cultured for further analysis under standard conditions. Four Beagle dogs, treated with bilateral, uncemented proximal tibial joint hemiarthroplasty with a prosthesis, were implanted with autologous GFP gene-modified cell-allograft composites to repair the bone cavity around each prosthesis.Results A significant reduction in cell viability was observed after impaction by fluorescence microscopy in vitro.However, there remained a proportion of GFP-positive cells that were viable and functionally active, as evidenced by the secretion of GFP protein in vitro and in vivo.Conclusions Gene-modified BMSCs seeded on granular allografts were able to withstand the impaction forces and to maintain their normal functions in vitro and in vivo, in spite of a partial loss in cell viability.