A system and method of processing bone is disclosed. A tissue separator is utilized to separate tissue comprising at least one of muscle, periosteum and connective tissue from bone in a safe, sterile and efficient manner. In one aspect, the particle reducer can include an impeller positioned with respect to a cutting surface on a drum. At least one of the impeller and the drum is rotated by a power source such that harvested tissue frictionally engages the cutting surface. In another aspect, a source of pressurized fluid can be directed at tissue to separate bone from non-bone tissue.