Objective: To evaluate the effect of free and liposome form of gallic acid on bone regeneration in critical defects in Wistar rats. Methods: Thirty-two female Wistar rats were divided into four study groups: group 1, negative control; group 2, positive control; group 3, gallic acid powder; group 4, gallic acid liposome. A critical-sized defect was created in all rats. Groups 2 to 4 had xenograft, autograft and membrane placement while negative control rats did not receive any treatment. The defect area was sutured and rats were kept alive for 30 d. At the end of the study, a bone specimen including the defect area was removed from calvaria. All specimens were evaluated under the stereomicroscope, then underwent histological analysis. Inflammatory cell counts, osteoblast, osteoclast counts, receptor activator of nuclear factor κ-B (RANKL), osteoprotegerin (OPG), runt-related transcription factor 2 (Runx2), bone morphogenetic protein-2 (BMP-2), and alkaline phosphatase were determined. Results: The biggest unhealed defect area was observed in the negative control group and the smallest was observed in the gallic acid liposome group. There were no differences between the positive control group vs. the gallic acid powder group and the gallic acid powder group vs. the gallic acid liposome group. The severity of inflammation was the highest in the negative control group and the lowest in the gallic acid liposome group with significant differences between the groups. All groups had similar osteoblast counts while osteoclast counts were the highest in the positive control group. Gallic acid groups had a lower number of osteoclasts compared with the positive control group. Runx2 and alkaline phosphatase levels were similar in the groups while OPG and BMP-2 levels exhibited a significant increase compared with the negative control group and the positive control group. RANKL was similar in the negative control group, the positive control group, and the gallic acid powder groups but decreased in the gallic acid liposome group. Conclusions: Gallic acid powder and liposome significantly improve bone regeneration in Wistar rats with calvarial defects. The improvement in healing is evident with decreased inflammation and RANKL expressions and increased OPG and BMP-2 expressions.