Oxysterols, naturally occurring cholesterol oxidation products, can induce osteoblast differentiation. Here, we investigated short-term 22(S)-hydroxycholesterol + 20(S)-hydroxycholesterol (SS) exposure on osteoblastic differentiation of marrow stromal cells. We further explored oxysterol ability to promote bone healing in vivo. Osteogenic differentiation was assessed by alkaline phosphatase (ALP) activity, osteocalcin (OCN) mRNA expression, mineralization, and Runx2 DNA binding activity. To explore the effects of osteogenic oxysterols in vivo, we utilized the critical-sized rat calvarial defect model. Poly(lactic-co-glycolic acid) (PLGA) scaffolds alone or coated with 140 ng (low dose) or 1400 ng (high dose) oxysterol cocktail were implanted into the defects. Rats were sacrificed at 6 weeks and examined by three-dimensional (3D) microcomputed tomography (microCT). Bone volume (BV), total volume (TV), and BV/TV ratio were measured. Culture exposure to SS for 10 min significantly increased ALP activity after 4 days, while 2 h exposure significantly increased mineralization after 14 days. Four-hour SS treatment increased OCN mRNA measured after 8 days and nuclear protein binding to an OSE2 site measured after 4 days. The calvarial defects showed slight bone healing in the control group. However, scaffolds adsorbed with low or high-dose oxysterol cocktail significantly enhanced bone formation. Histologic examination confirmed bone formation in the defect sites grafted with oxysterol-adsorbed scaffolds, compared to mostly fibrous tissue in control sites. Our results suggest that brief exposure to osteogenic oxysterols triggered events leading to osteoblastic cell differentiation and function in vitro and bone formation in vivo. These results identify oxysterols as potential agents in local and systemic enhancement of bone formation.