Bioactive glass (BAG) S53P4 granules represent a bone augmentation biomaterial for the surgical treatment of bony defects, even in challenging conditions such as osteomyelitis. The aim of this eight-week rabbit implantation study was to evaluate the biocompatibility and bone regeneration performance of a BAG S53P4 putty formulation following its implantation into the proximal tibia bone of twenty-eight New Zealand white rabbits. BAG S53P4 putty was compared to BAG S53P4 granules (0.5-0.8 mm) to evaluate whether the synthetic putty binder influences the bone regeneration of the osteostimulative granules. The putty formulation facilitates clinical use because of its mouldability, injectability and ease of mixing with autograft. Implantation of putty and granules into proximal tibia defects resulted in good osseointegration of the two groups. Both biomaterials were biocompatible, showed high new bone formation, high vascularization and periosteal growth. No signs of disturbed bone formation were observed due to the PEG-glycerol binder in the BAG S53P4 putty. Instead, intramedullary ossification and stromal cell reaction were more advanced in the putty group compared to the control group (p = 0.001 and p < 0.001). In conclusion, the novel mouldable BAG S53P4 putty showed reliable bone regeneration in bony defects without adverse tissue or cell reactions.