Aims. We hypothesized that there is no difference in the clinical and radiological outcomes using local bone graft versus iliac graft for subtalar distraction arthrodesis in patients with calcaneal malunion. In addition, using local bone graft negates the donor site morbidity. Patients and Methods. We prospectively studied 28 calcaneal malunion patients (the study group) who were managed by subtalar distraction arthrodesis using local calcaneal bone graft. The study group included 16 male and 12 female patients. The median age was 37.5 years (interquartile range (IQR) 29 to 43). The outcome of the study group was compared with a control group of ten patients previously managed by subtalar distraction arthrodesis using iliac bone graft. The control group included six male and four female patients. The median age was 41.5 years (IQR 36 to 44). Results. The mean American Orthopaedic Foot & Ankle Society (AOFAS) hindfoot score improved significantly in the study and the control groups (p < 0.001). Fusion was achieved in 27 patients in the study group at a median time of 13 weeks (IQR 12 to 14), while all the patients in the control group achieved fusion at a mean time of 13.2 weeks (11 to 15). The mean talocalcaneal height and talar declination angle improved significantly in both the study and the control groups (p < 0.001). There was no significant difference between both groups concerning the preoperative or the postoperative clinical and radiological measurements. Donor site morbidity was reported in four out of ten patients in the control group. Conclusion. Local calcaneal bone graft can successfully be used to achieve subtalar distraction arthrodesis with appropriate correction of alignment and calcaneal malunion. We recommend using local instead of iliac bone graft as it gave comparable results and avoids the possibility of donor site morbidity. Cite this article: Bone Joint J 2019;101-B:596–602