Impaired bone healing biology in osteosarcoma patients contributes to significant local complications following limb salvage surgery. Recombinant human bone morphogenetic protein-2 (rhBMP-2) has potential to mitigate these complications; however, its use is limited due to concerns of pro-oncogenic signalling. Conversely, recent pre-clinical studies suggest BMP-2 may induce osteosarcoma differentiation. We assessed the oncologic consequences of BMP-2 signalling on osteosarcoma in vitro and in vivo. Two human (143b and SaOS-2) and one syngeneic mouse (DLM8-M1) osteosarcoma cell lines were engineered to up-regulate BMP-2. Xenograft orthotopic murine models were used to assess the effects of exogenous and endogenous elevations in BMP-2 signaling on tumour growth and metastasis. Tumour burden was quantified using tumour volume measurements, bioluminescence and micro-CT. In the 143b cell line there was no differentiation response, however cellular proliferation, motility and tumour growth were enhanced with BMP-2. The SaOS-2 cell line was found to be more differentiated than the 143b cell line and responded to BMP-2 signalling with partial osteoblastic differentiation, and a reduction in in vivo local tumour burden. Rates of lung metastasis were unchanged in both 143b and SaOS-2. BMP-2 upregulation in the DLM8-M1 cell line induced a partial differentiation response; in vivo studies are ongoing. The observed divergent effects of BMP-2 on osteosarcoma tumour growth may be due to the variation in intrinsic differentiation abilities of different cell lines. Importantly, these results do not support the clinical application of BMP-2 in osteosarcoma limb salvage surgery due to the potential for stimulating growth of any microscopic tumour burden.