Icariin, a plant-derived flavonol glycoside, has been proved as an osteoinductive agent for bone regeneration. For this reason, we developed an icariin-loaded chitosan/nano-sized hydroxyapatite (IC-CS/HA) system which controls the release kinetics of icariin to enhance bone repairing. First, by Fourier transform infrared spectroscopy, we found that icariin was stable in the system developed without undergoing any chemical changes. On the other hand, X-ray diffraction, scanning electron microscopy and mechanical test revealed that the introduction of icariin did not remarkably change the phase, morphology, porosity and mechanical strength of the CS/HA composite. Then the hydrolytic degradation and drug release kinetics in vitro were investigated by incubation in phosphate buffered saline solution. The results indicated that the icariin was released in a temporally controlled manner and the release kinetics could be governed by degradation of both chitosan and hydroxyapatite matrix. Finally the in vitro bioactivity assay revealed that the loaded icariin was biologically active as evidenced by stimulation of bone marrow derived stroma cell alkaline phosphatase activity and formation of mineralized nodules. This successful IC-CS/HA system offers a new delivery method of osteoinductive agents and a useful scaffold design for bone regeneration.