Angiogenic-osteogenic cell encapsulation system is a technical need for human mesenchymal stem cell (hMSC)-based bone tissue engineering (BTE). Here, we have developed a highly efficient hMSC encapsulation system by incorporating bivalent cobalt doped nano-hydroxyapatite (HAN) and gum tragacanth (GT) as angiogenic-osteogenic components into the calcium alginate (CA) beads. Physico-chemical characterizations revealed that the swelling and degradation of HAN incorporated CA-GT beads (GT-HAN) were 1.34 folds and 2 folds higher than calcium alginate (CA) beads. Furthermore, the diffusion coefficient of solute molecule was found 2.5-fold higher in GT-HAN with respect to CA bead. It is observed that GT-HAN supports the long-term viability of encapsulated hMSC and causes 50% less production of reactive oxygen species (ROS) in comparison to CA beads. The expression of osteogenic differentiation markers was found 1.5–2.5 folds higher in the case of GT-HAN in comparison to CA. A similar trend was observed for hypoxia inducible factor 1 alpha (HIF-1α) and vascular endothelial growth factor (VEGF). The soluble secretome from hMSC encapsulated in the GT-HAN induced proliferation of endothelial cells and supported tube formation (2.5-fold higher than CA beads). These results corroborated that GT-HAN could be used as an angiogenic-osteogenic cell encapsulation matrix for hMSC encapsulation and BTE application. © 2021 Elsevier B.V.