Bone defects are usually resulted from traumatic injuries, infections, and bone tumors. The treatments mainly include autologous bone graft, allograft bone graft, distraction osteogenesis, vascularized bone grafting and amputation. All of the procedures show their inherent limitations due to different operative indications and different surgical techniques. The emergence of Masquelet technique provides a simple, safe, and more cost-effective solution in treating bone defects. The present article reviews the relevant literatures and summarizes the progress of Masquelet technique in the treatment of bone defects. The technique mainly includes two-step process which involves the induction of the induced membrane prior to the introduction of graft material into induced membrane. The first stage involves radical debridement of all infected or necrotic tissue, fracture stabilization, and filling the segmental bone defect with a cement spacer, composed of polymethyl methacrylate (PMMA) cement. Based on the results of culture performed on the wound samples, the sensitive antibiotics are mixed with cement for the infected bone defect. The second stage of bone grafting is performed within 6-8 weeks after the primary surgery. A longitudinal incision is performed through the induced membrane. The cement spacer is removed carefully and autogenous cancellous bone graft is placed to fill the bone defect and to close the induced membrane. A large number of experimental studies and clinical observations show that the induced membrane is a highly vascularized biological membrane rich in vascular endothelial growth factor (VEGF), transforming growth factor-β1(TGF-β1), bone morphogenetic protein 2 (BMP-2) and other growth factors, which can promote bone regeneration and repair. Masquelet technique can effectively treat multiple parts of posttraumatic bone defects, infectious bone defects, bone defects after tumor resection, congenital tibial pseudarthrosis, and so on. Masquelet provide a choice to treat bone defect for maxillofacial. The complications of Masquelet technique include infection recurrence, bone graft absorption, nonunion and pseudarthrosis. This study is to summarize the recent development of Masquelet technique, and to provide theoretical guidance for the application of Masquelet technique.