Bone substitutes can be designed to replicate physiological structure and function by creating a microenvironment that supports crosstalk between bone and immune cells found in the native tissue, specifically osteoblasts and osteoclasts. Human induced pluripotent stem cells (hiPSC) represent a powerful tool for bone regeneration because they are a source of patient-specific cells that can differentiate into all specialized cell types residing in bone. We show that osteoblasts and osteoclasts can be differentiated from hiPSC-mesenchymal stem cells and macrophages when co-cultured on hydroxyapatite-coated poly(lactic-co-glycolic acid)/poly(L-lactic acid) (HA-PLGA/PLLA) scaffolds. Both cell types seeded on the PLGA/PLLA especially with 5% w/v HA recapitulated the tissue remodeling process of human bone via coupling signals coordinating osteoblast and osteoclast activity and finely tuned expression of inflammatory molecules, resulting in accelerated in vitro bone formation. Following subcutaneous implantation in rodents, co-cultured hiPSC-MSC/-macrophage on such scaffolds showed mature bone-like tissue formation. These findings suggest the importance of coupling matrix remodeling through osteoblastic matrix deposition and osteoclastic tissue resorption and immunomodulation for tissue development.