In this study, we examined the proliferation capability and osteogenic and chondrogenic differentiation potential of non-hypertrophic nonunion cells (NHNCs), and the effect of Escherichia coli-derived BMP-2 (E-BMP-2) on them. We enrolled five patients with non-hypertrophic nonunion. NHNCs isolated from nonunion tissue sampled during surgery were cultured, passaged, counted every 14 days, and analyzed. NHNCs were homogenous fibroblastic adherent cells and long-lived through at least 10 passages, with a slight decline. The cells were consistently positive for mesenchymal stem cell-related markers CD73 and CD105, and negative for the hematopoietic markers CD14 and CD45. NHNCs could differentiate into osteoblast lineage cells; however, they did not have strong calcification or sufficient chondrogenic differentiation capability. E-BMP-2 did not affect the proliferative capability of the cells but improved their osteogenic differentiation capability by increasing alkaline phosphatase activity and upregulating the gene expression of osterix, bone sialoprotein, and osteocalcin. E-BMP-2 enhanced their chondrogenic differentiation capability by upregulating the gene expression of aggrecan and collagen type II. We showed, for the first time, that NHNCs have the capacity to differentiate into osteoblast-lineage cells, although the chondrogenic differentiation potential was poor. Local application of E-BMP-2 with preservation of nonunion tissue is a potential treatment option for non-hypertrophic nonunion. View Full-Text ►▼ Show Figures This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.