In the current study, we used an estrogen-deficient mouse model of osteoporosis to test the efficacy of a cell-generated bone tissue construct for bone augmentation of an impaired healing fracture. A reduction in new bone formation at the defect site was observed in ovariectomized fractures compared to the control group using repeated measures in vivo micro-computed tomography (μCT) imaging over 4 weeks. A significant increase in the bone mineral density (BMD), trabecular bone volume ratio, and trabecular number, thickness and connectivity were associated with fracture repair in the control group, whereas the fractured bones of the ovariectomized mice exhibited a loss in all of these parameters (p < 0.001). In a separate group, ovariectomized fractures were treated with murine embryonic stem (ES) cell-derived osteoblasts loaded in a three-dimensional collagen I gel and recovery of the bone at the defect site was observed. A significant increase in the trabecular bone volume ratio (p < 0.001) and trabecular number (p < 0.01) was observed by 4 weeks in the fractures treated with cell-loaded collagen matrix compared to those treated with collagen I alone. The stem cell-derived osteoblasts were identified at the fracture site at 4 weeks post-implantation through in situ hybridization histochemistry. Although this cell tracking method was effective, the formation of an ectopic cellular nodule adjacent to the knee joints of two mice suggested that alternative in vivo cell tracking methods should be employed in order to definitively assess migration of the implanted cells. To our knowledge, this study is the first of its kind to examine the efficacy of stem cell therapy for fracture repair in an osteoporosis-related fracture model in vivo. The findings presented provide novel insight into the use of stem cell therapies for bone injuries.