Bone is a composite material consisting of aqueous gel and mineral phases. The aqueous gel phase gives bone its form and contributes to its ability to resist tension, while the mineral component resists compression. The combination of a hard inorganic phase and an elastic gel network provides bone with unique mechanical properties as well as a medium for diffusion and release of biologically active agents and it also facilitates communication with the cellular environment. A tissue engineered synthetic biomaterial as a scaffold for bone regeneration should provide temporary structural support to the reconstructed region and a medium for solubilization, diffusion, release of nutrients and growth factors, and their interactions with cells. In this work, the material and biologic properties of a novel synthetic matrix metalloproteinase (MMP) degradable hydrogel/apatite nanocomposite is investigated for its usefulness as a model matrix to mimic the gel and mineral components of the bone matrix and to fabricate aqueous-based scaffolds for bone regeneration. The gel phase is made from poly(lactide-ethylene oxide-fumarate), hereafter designated as PLEOF, terpolymer in which the water content can be adjusted by changing the ratio of the hydrophobic (lactide) to hydrophilic (ethylene oxide) oligomers. The hydrogel and apatite phases are crosslinked using an MMP degradable peptide crosslinker to modulate the matrix degradation kinetics with the migration of bone marrow stromal (BMS) cells. The results demonstrate that MMP degradable scaffolds fabricated from the PLEOF hydrogel and apatite nanoparticles are biocompatible and support cell attachment and migration.