Abstract Aim Alveolar bone regeneration remains a significant clinical challenge in periodontology and dental implantology. This study assessed the mineralized tissue forming potential of 3‐D printed medical grade polycaprolactone ( mPCL ) constructs containing osteoblasts (OB) encapsulated in a hyaluronic acid ( HA )‐hydrogel incorporating bone morphogenetic protein‐7 ( BMP ‐7). Materials and Methods HA ‐hydrogels containing human OB ± BMP ‐7 were prepared. Cell viability, osteogenic gene expression, mineralized tissue formation and BMP ‐7 release in vitro, were assessed by fluorescence staining, RT ‐ PCR , histological/ μ ‐ CT examination and ELISA respectively. In an athymic rat model, subcutaneous ectopic mineralized tissue formation in mPCL ‐hydrogel constructs was assessed by μ ‐ CT and histology. Results Osteoblast encapsulation in HA ‐hydrogels did not detrimentally effect cell viability, and 3‐D culture in osteogenic media showed mineralized collagenous matrix formation after 6 weeks. BMP ‐7 release from the hydrogel was biphasic, sustained and increased osteogenic gene expression in vitro. After 4 weeks in vivo, mPCL ‐hydrogel constructs containing BMP ‐7 formed significantly more volume (mm 3 ) of vascularized bone‐like tissue. Conclusions Functionalized mPCL ‐ HA hydrogel constructs provide a favourable environment for bone tissue engineering. Although encapsulated cells contributed to mineralized tissue formation within the hydrogel in vitro and in vivo, their addition did not result in an improved outcome compared to BMP ‐7 alone.