Tissue engineering has become an alternative method to traditional surgical treatments for the repair of bone defects, and an appropriate scaffold supporting bone formation is a key element in this approach. In the present study, nanofibrous organic and inorganic composite scaffolds containing nano-sized demineralized bone powders (DBPs) with biodegradable poly(L-lactide) (PLA) were developed using an electrospinning process for engineering bone. To assess their biocompatibility, in vitro osteogenic differentiation of human mandible-derived mesenchymal stem cells (hMSCs) cultured on PLA or PLA/DBP composite nanofiber scaffolds were examined. The mineralization of hMSCs cultured with osteogenic supplements on the PLA/DBP nanofiber scaffolds was remarkably greater than on the PLA nanofiber scaffold during the first 14 days of culture but reached the same level after 21 days. The in vivo osteoconductive effect of PLA/DBP nanofibrous scaffolds was further investigated using rats with critical-sized skull defects. Micro-computerized tomography revealed that a greater amount of newly formed bone extended across the defect area in PLA/DBP scaffolds than in the nonimplant and PLA scaffolds 12 weeks after implantation and that the defect size was almost 90% smaller. Therefore, PLA/DBP composite nanofiber scaffolds may serve as a favorable matrix for the regeneration of bone tissue.