This paper outlines a methodology for analysing problems involving bone-implant interaction. An elastic formulation for cortical and trabecular bone is presented wherein bone is considered to be an inhomogeneous, anisotropic material. The formulation incorporates the concept of ‘directional porosity’ as a measure of the material microstructure. Subsequently, a simplified procedure for the identification of material parameters is proposed. The procedure employs Eshelby’s solution to estimate the elastic constants while the principal directions of anisotropy are derived from Wolff’s hypothesis of trabecular architecture. The formulation for trabecular bone is later extended to the elastoplastic regime and the functional form of the failure criterion is proposed. The mathematical formulation is illustrated by a numerical example. In particular, some preliminary results of a finite element analysis of a hip implant system are discussed.