There is a dearth of biologically active matrices for the encapsulation of bone cells. Here, we hypothesize that the use of gum tragacanth (GT) with alginate might improve the biological properties of calcium alginate (CA) beads, a common cell encapsulation system. We show that the incorporation of GT in the bead-composition significantly improves the molecular transport, swelling and degradation properties of the CA bead. Although no significant molecular interaction between GT and CA was found, a decrease in the concentration of calcium with an increase in GT concentration was noticed. We show that the presence of GT in the bead-composition resulted in improved viability, proliferation, and differentiation of encapsulated bone cells. We further demonstrate that bone cell loaded CA-GT beads are capable of inducing angiogenesis. In conclusion, we prove that CA-GT beads are more osteo-conductive and proangiogenic in comparison to pure CA beads. © 2017 The Royal Society of Chemistry.