Osteoporosis might be due to defects in mesenchymal stem cells (MSCs) that lead to reduced proliferation and osteoblast differentiation. We hypothesized that transplantation of MSCs into sites at risk for developing osteoporotic bone could improve bone structure and biomechanics. The aim of this study was to establish an osteoporosis rabbit model by ovariectomy (OVX), characterize the autologous MSCs from the OVX rabbits, and transplant the autologous MSCs into the OVX rabbits. MSCs harvested from bone marrow of normal and OVX rabbits were culture expanded and differentiated in osteogenic medium. Phenotypes were evaluated by collagen I immunostaining, von Kossa staining, and quantitative assays of bone-specific alkaline phosphatase (B-ALP) and osteocalcin (OCN). MSCs were transfected with green fluorescence protein (GFP) and implanted in the gluteus muscle to trace their fate in vivo. Cultured autologous MSCs from OVX rabbits were constructed in calcium alginate gels and then transplanted in the distal femurs. At 4 and 8 weeks after implantation, histomorphometrical and biomechanical analyses were performed on the samples. MSCs from OVX rabbits displayed higher B-ALP activity, but had similar OCN levels as compared to those from sham rabbits. After 8 weeks of implantation, more bone apposition was found in the MSC-alginate-treated group. Histomorphometry indicated increased trabecular thickness. Histology also illustrated improved microstructures with newly formed osteoids and enhanced trabecular thickness. In addition, biomechanical testing revealed stronger stiffness in the MSC-alginate treatment group. Therefore, this study implies that transplantation of MSCs can help to strengthen osteoporotic bone in rabbits.