Significant evidence has indicated that poly(L-lactide)-co-(ɛ-caprolactone) [(poly(LLA-co-CL)] scaffolds could be one of the suitable candidates for bone tissue engineering. Oxygen-terminated nanodiamond particles (n-DP) were combined with poly(LLA-co-CL) and revealed to be positive for cell growth. In this study, we evaluated the influence of poly(LLA-co-CL) scaffolds modified by n-DP on attachment, proliferation, differentiation of bone marrow stromal cells (BMSCs) in vitro, and on bone formation using a sheep calvarial defect model. BMSCs were seeded on either poly(LLA-co-CL)- or n-DP-coated scaffolds and incubated for 1 h. Scanning electron microscopy (SEM) and fluorescence microscopy were used in addition to protein and DNA measurements to evaluate cellular attachment on the scaffolds. To determine the effect of n-DP on proliferation of BMSCs, cell/scaffold constructs were harvested after 3 days and evaluated by Bicinchoninic Acid (BCA) protein assay and SEM. In addition, the osteogenic differentiation of cells grown for 2 weeks on the various scaffolds and in a dynamic culture condition was evaluated by real-time RT-PCR. Unmodified and modified scaffolds were implanted into the calvaria of six-year-old sheep. The expression of collagen type I (COL I) and bone morphogenetic protein-2 (BMP-2) after 4 weeks as well as the formation of new bone after 12 and 24 weeks were analyzed by immunohistochemistry and histology. Scaffolds modified with n-DP supported increased cell attachment and the mRNA expression of osteopontin (OPN), bone sialoprotein (BSP), and BMP-2 were significantly increased after 2 weeks of culture. The BMSCs had spread well on the various scaffolds investigated after 3 days in the study with no significant difference in cell proliferation. Furthermore, the in vivo data revealed more positive staining of COL I and BMP-2 in relation to the n-DP-coated scaffolds after 4 weeks and presented more bone formation after 12 and 24 weeks. n-DP modification significantly increased cell attachment and differentiation of BMSCs on poly(LLA-co-CL) scaffolds in vitro and enhanced bone formation in vivo.