A chitosan-based microsphere delivery system has been fabricated for controlled release of alendronate (AL). The present study aimed to incorporate the chitosan/hydroxyapatite microspheres-loaded with AL (CH/nHA-AL) into poly(L-lactic acid)/nanohydroxyapatite (PLLA/nHA) matrix to prepare a novel microspheres-scaffold hybrid system (CM-ALs) for drug delivery and bone tissue engineering application. The characteristics of CM-ALs scaffolds containing 10% and 20% CH/nHA-AL were evaluated in vitro, including surface morphology and porosity, mechanical properties, drug release, degradation, and osteogenic differentiation. The in vivo bone repair for large segmental radius defects (1.5 cm) in a rabbit model was evaluated by radiography and histology. In vitro study showed more sustained drug release of CM-AL-containing scaffolds than these of CM/nHA-AL and PLLA/nHA/AL scaffolds, and the mechanical and degradation properties of CM-ALs (10%) scaffolds were comparable to that of PLLA/nHA control. The osteogenic differentiation of adipose-derived stem cells (ASCs) was significantly enhanced as indicated by increased alkaline phosphates (ALP) activity and calcium deposition. In vivo study further showed better performance of CM-ALs (10%) scaffolds with complete repair of large-sized bone defects within 8 weeks. A microspheres-scaffold-based release system containing AL-encapsulated chitosan microspheres was successfully fabricated in this study. Our results suggested the promising application of CM-ALs (10%) scaffolds for drug delivery and bone tissue engineering.