Hydroxyapatite (HA) in 25%, 50% and 75% w/w fractions was incorporated into chitin solutions and processed into air- and freeze-dried materials. These HA-chitin materials were exposed to cell cultures and implanted into the intramusculature of a rat model. The HA-chitin materials were found to be non-cytotoxic and degraded in vivo. The presence of the HA filler enhanced calcification as well as accelerated degradation of the chitin matrix. The freeze-dried HA-chitin matrixes were selected for further cell seeding experiments because of their porous nature. Mesenchymal stem cells harvested from NZW rabbits were induced into osteoblasts in vitro using dexamethasone. These osteoblasts were cultured for 1 week, statically loaded onto the porous HA-chitin matrixes and implanted into bone defects of the rabbit femur for 2 months. Histology of explants showed bone regeneration with biodegradation of the HA-chitin matrix. Similarly, green fluorescence protein (GFP) transfected MSC-induced osteoblasts were also loaded onto porous HA-chitin matrixes and implanted into the rabbit femur. The results from GFP-transfected MSCs showed that loaded MSCs-induced osteoblasts did not only proliferate but also recruited surrounding tissue to grow in. This study demonstrates the potential of HA-chitin matrixes as a good substrate candidate for tissue engineered bone substitute.