Recombinant parathyroid hormone (rPTH) therapy has been evaluated for skeletal repair in animal studies and clinical trials based on its known anabolic effects, but its effects on angiogenesis and fibrosis remain poorly understood. We examined the effects of rPTH therapy on blood vessel formation and osseous integration in a murine femoral allograft model, which caused a significant increase in small vessel numbers, and decreased large vessel formation (p < 0.05). Histology showed that rPTH also reduced fibrosis around the allografts to similar levels observed in live autografts, and decreased mast cells at the graft-host junction. Similar effects on vasculogenesis and fibrosis were observed in femoral allografts from Col1caPTHR transgenic mice. Gene expression profiling revealed rPTH-induced angiopoietin-1 (8-fold), while decreasing angiopoietin-2 (70-fold) at day 7 of allograft healing. Finally, we show anti-angiopoietin-2 peptibody (L1-10) treatment mimics rPTH effects on angiogenesis and fibrosis. Collectively, these findings show that intermittent rPTH treatment enhances structural allograft healing by two processes: (1) anabolic effects on new bone formation via small vessel angiogenesis, and (2) inhibition of angiopoietin-2-mediated arteriogenesis. The latter effect may function as a vascular sieve to limit mast cell access to the site of tissue repair, which decreases fibrosis around and between the fractured ends of bone. Thus, rPTH therapy may be generalizable to all forms of tissue repair that suffer from limited biointegration and excessive fibrosis.