The aim of this study was to investigate physical and biological properties of collagen (COL) and demineralized bone powder (DBP) scaffolds for bone tissue engineering. DBP was prepared and divided into three groups, based on various particle sizes: 75-125 mu m, 125-250 mu m, and 250-500 mu m. DBP was homogeneously mixed with type I collagen and three-dimensional scaffolds were constructed, applying chemical crosslinking and lyophilization. Upon culture with human periosteum-derived cells (PD cells), osteogenic differentiation of PD cells was investigated using alkaline phosphatase (ALP) activity and calcium assay kits. The physical properties of the COL/DBP scaffolds were obviously different from COL scaffolds, irrespective of the size of DBP. In addition, PD cells cultured with COL scaffolds showed significantly higher cell adhesion and proliferation than those with COL/DBP scaffolds. In contrast, COL/DBP scaffolds exhibited greater osteoinductive potential than COL scaffolds. The PD cells with COL/DBP scaffolds possessed higher ALP activity than those with COL scaffolds. PD cells cultured with COL/DBP scaffolds with 250-500 mu m particle size yielded the maximum calcium deposition. In conclusion, PD cells cultured on the scaffolds could exhibit osteoinductive potential. The composite scaffold of COL/DBP with 250-500 mu m particle size could be considered a potential bone tissue engineering implant.