Poor vascularization coupled with mechanical instability is the leading cause of post-operative complications and poor functional prognosis of massive bone allografts. To address this limitation, we designed a novel continuous polymer coating system to provide sustained localized delivery of pharmacological agent, FTY720, a selective agonist for sphingosine 1-phosphate receptors, within massive tibial defects. In vitro drug release studies validated 64% loading efficiency with complete release of compound following 14 days. Mechanical evaluation following six weeks of healing suggested significant enhancement of mechanical stability in FTY720 treatment groups compared with unloaded controls. Furthermore, superior osseous integration across the hostegraft interface, significant enhancement in smooth muscle cell investment, and reduction in leukocyte recruitment was evident in FTY720 treated groups compared with untreated groups. Using this approach, we can capitalize on the existing mechanical and biomaterial properties of devitalized bone, add a controllable delivery system while maintaining overall porous structure, and deliver a small molecule compound to constitutively target vascular remodeling, osseous remodeling, and minimize fibrous encapsulation within the allograftehost bone interface. Such results support continued evaluation of drug-eluting allografts as a viable strategy to improve functional outcome and long-term success of massive cortical allograft implants.