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Absorbable collagen sponges (ACS) are used clinically as carriers of recombinant human bone morphogenetic protein 2 (rhBMP-2) to promote bone regeneration. ACS exhibit ectopic bone growth due to delivery of supraphysiological levels of rhBMP-2, which is particularly problematic in craniofacial bone injuries for both functional and esthetic reasons. We hypothesized that hydrogels from the reduced form of keratin proteins (kerateine) would serve as a suitable alternative to ACS carriers of rhBMP-2. The rationale for this hypothesis is that keratin biomaterials degrade slowly in vivo, have modifiable material properties, and have demonstrated capacity to deliver therapeutic agents. We investigated kerateine hydrogels and freeze-dried scaffolds as rhBMP-2 carriers in a critically-sized rat mandibular defect model. ACS, kerateine hydrogels, and kerateine scaffolds loaded with rhBMP-2 achieved bridging in animals by 8 weeks as indicated by micro-computed tomography. Kerateine scaffolds achieved statistically increased bone mineral density compared to ACS and kerateine hydrogels, with levels reaching those of native bone. Importantly, both kerateine hydrogels and kerateine scaffolds had significantly less ectopic bone growth than ACS sponges at both 8 and 16 weeks post-operatively. These studies demonstrate the suitability of keratins as rhBMP-2 carriers due to equal regenerative capacity with reduced ectopic growth compared to ACS.