The surgical repair of critical bone defects utilizes bone grafts or synthetic implant materials. Biodegradable polymers offer a variety of advantages for the development of new bone tissue engineering scaffolds. These include the ability to tailor the mechanical properties and degradation kinetics to suit the application of the material. Effective bone biomaterials provide structural support for bone regeneration and elicit minimal inflammatory and toxic effects when implanted. Poly (3-hydroxybutyrate-co- 3-hydroxyvalerate) (PHBV) is a biodegradable polymer extracted from bacteria that possesses suitable mechanical properties for use as a bone biomaterial and has a slow rate of degradation in biological environments. This study characterized the biocompatibility and osteointegration of both PHBV and a PHBV composite reinforced with hydroxyapatite (HA). The cellular responses to these materials were examined in vitro and in vivo in an animal bone defect model. The pro-inflammatory response by the murine macrophage RAW264.7 cell line to PHBV was determined in vitro by using a novel fluorescence assay and by measuring changes in a standard set of cellular inflammation markers. Cells were cultured on solvent-cast PHBV films, which induced a pro-inflammatory response that required direct contact between the material and the macrophages. The pro-inflammatory stimulus in PHBV was identified as contaminating bacterial lipopolysaccharide (LPS) by culturing with bone marrow-derived macrophages from LPS-hyporesponsive C3H/HeJ mice and CpG nonresponsive TLR9-/- mice. A series of purification/inactivation procedures were evaluated and a procedure was developed that combined solvent extraction and hydrogen peroxide treatment in solution. The optimized treatment substantially reduced the pro-inflammatory response to PHBV without adversely affecting the physical properties of the material. The incorporation of a reinforcing phase can improve the physical properties of polymers and if a biocompatible material such as HA is used then this may improve the biocompatibility of the material. The properties and distribution of the HA in solvent cast PHBV composite with HA (HA/PHBV) were characterized by scanning and transmission microscope and by surface analysis techniques. These studies showed that the distribution of the nano-sized reinforcing phase in HA/PHBV varied with the amount of HA incorporated. The pro-inflammatory response of macrophages to the HA/PHBV was less than for PHBV alone. In addition, the ability of osteoclast-like cells to attach to, proliferate, differentiate and resorb the PHBV and HA/PHBV composite films was assayed in vitro. Osteoclast-like cells could attach to all of the materials and differentiate in response to cytokine treatment but failed to form functional actin ring structures or resorption pits on either the PHBV or HA/PHBV films. The in vivo biocompatibility of purified PHBV and HA/PHBV composite was characterized by implanting cylindrical blocks of these materials into a murine tibial cortical defect. The defect was either filled with the implant or left unfilled as a control. Animals were sacrificed at one week and four weeks post surgery and tibiae were decalcified and paraffin embedded. Bone sections were examined using standard histological staining as well as immunohistochemical staining to determine the extent of the cellular response. Both PHBV and HA/PHBV implants induced a mild immune response one week post surgery, which reduced at four weeks. Bone remodelling occurred at the marrow cavity at the implant-tissue interface, with the formation of new woven bone and the presence of large numbers of TRAP+ osteoclasts. Inflammatory cells were visible at the implant tissue interface where the implant is not in contact with the marrow tissues four weeks post surgery suggesting the initiation of a foreign body giant cell reaction at this site. The in vitro data from this thesis confirmed that PHBV and HA/PHBV composite materials could be prepared and purified to reduce the cellular pro-inflammatory response. The in vivo data showed that the materials induced a mild macrophage related tissue reaction with no evidence of osteointegration occurring at the implant-tissue interface up to four weeks post-surgery. The mechanical, physical properties of these materials and the biological responses to them suggest that with further optimization, PHBV could be utilized as a bone biomaterial.