Purpose: To evaluate the osteogenic activity of a novel synthetic peptide, PEP7, derived from bone morphogenetic protein 2 (BMP-2) on MG-63, a human osteoblast-like cell line, and on new bone formation in vivo. Materials and Methods: The novel synthetic peptide was synthesized by a standard Fmoc method and purified to 98% purity. Cell adhesion, proliferation, and differentiation of MG-63 were observed in the presence of different concentrations of PEP7. Eight micropigs were used to evaluate new bone formation in a supra-alveolar peri-implant defect model. The PEP7-coated implants were randomly allocated to mandible defect sites. The animals were sacrificed after 8 weeks for histologic analysis. Results: PEP7 affected an early stage of adhesion and dose-dependently stimulated differentiation of MG-63 cells. The cell adhesion rate in the group coated with 1 µM PEP7 increased approximately 47% compared to the uncoated group and 32% compared to the group coated with recombinant human bone morphogenetic protein 2 (rhBMP-2) (P .05). The alkaline phosphatase activities of groups treated with 50 µM of PEP7 were higher than for the other groups. PEP7 induced production of osteoblast-specific proteins in MG-63 cells. The largest effect was caused by 50 µM PEP7, followed by the groups treated with 20 µM synthetic peptide and 10 ng/mL rhBMP-2 (P .05). Conclusions: A novel synthetic peptide derived from BMP-2 has osteoinductivity and new bone formation effects, including vertical augmentation of the alveolar ridge.