The surface marker profile of mesenchymal stromal cells (MSCs) suggests that they can escape detection by the immune system of an allogeneic host. This could be an optimal strategy for bone regeneration applications, where off-the-shelf cells could be implanted to heal bone defects. However, it is unknown how pre-differentiation of MSCs to an osteogenic lineage, a means of improving bone formation, affects their immunogenicity. Using immunohistological techniques in a rat ectopic implantation model, we demonstrate that allogeneic osteoprogenitors mount a T cell- and B cell-mediated immune response resulting in an absence of in vivo bone formation. Suppression of the host immune response with daily administration of an immunosuppressant, FK506, is effective in preventing the immune attack on the allogeneic osteoprogenitors. In the immunosuppressed environment, the allogeneic osteoprogenitors are capable of generating bone in amounts similar to those of syngeneic cells. However, using osteoprogenitors from one of the allogeneic donors led to newly deposited bone that was attacked by the host immune system, despite the continued administration of the immunosuppressant. This suggests that, although using an immunosuppressant can potentially suppress the immune attack on the allogeneic cells, optimizing the dose of the immunosuppressant may be crucial to ensure bone formation within the allogeneic environment. Overall, allografts comprising osteoprogenitors derived from allogeneic MSCs have the potential to be used in bone regeneration applications.