The effects and inflammation-related side effects of bone morphogenetic protein (BMP)-2 on posterior lumbar interbody fusion are controversial. One of the potential causes for the inconsistent results is the uncontrolled release of BMP-2 from the collagen carrier. Therefore, BMP delivery systems that support effective bone regeneration while attenuating the side effects are strongly sought for. We developed NOVOSIS putty (NP), a novel composite material of hydroxyapatite (HA), beta-tricalcium phosphate (β-TCP)/hydrogel, and BMP-2, which can sustainably release BMP-2 over 2 weeks. This study was aimed at comparing the effects and side effects of NP and collagen sponge (CS) containing BMP-2 using a rat caudal intervertebral fusion model. The fusion rates of NP with low and high doses of BMP-2 were significantly higher than those of an iliac bone (IB) graft, but those of CS with low and high doses of BMP-2 were not different from those of the IB graft. Furthermore, the incidences of ectopic bone formation and soft tissue swelling were significantly lower in the NP group than in the CS group. The HA/β-TCP/hydrogel carrier enabled superior bone induction with low-dose BMP-2 and decreased the incidence of side effects caused by high-dose BMP-2 vis-à-vis the collagen carrier.