An improved demineralized bone matrix (DBM) or other matrix composition is provided that has been mixed with a stabilizing agent that acts as (1) a diffusion barrier, (2) a enzyme inhibitor, (3) a competitive substrate, or (4) a masking moiety. A diffusion barrier acts as a barrier so as to protect the osteoinductive factors found in DBM from being degraded by proteolytic and glycolytic enzymes at the implantation site. Stabilizing agents may be any biodegradable material such as starches, modified starches, cellulose, dextran, polymers, proteins, and collagen. As the stabilizing agents degrades or dissolves in vivo, the osteoinductive factors such as TGF-.beta., BMP, and IGF are activated or exposed, and the activated factors work to recruit cells from the preivascular space to the site of injury and to cause differentiation into bone-forming cells. The invention also provides methods of preparing, testing, and using the inventive improved osteodinductive matrix compositions.