Pluripotent cells represent a powerful tool for tissue regeneration, but their clinical utility is limited by their propensity to form teratomas. Little is known about their interaction with the surrounding niche following implantation and how this may be applied to promote survival and functional engraftment. In this study, we evaluated the ability of an osteogenic microniche consisting of a hydroxyapatite-coated, bone morphogenetic protein-2–releasing poly-
l
-lactic acid scaffold placed within the context of a macroenvironmental skeletal defect to guide in vivo differentiation of both embryonic and induced pluripotent stem cells. In this setting, we found de novo bone formation and participation by implanted cells in skeletal regeneration without the formation of a teratoma. This finding suggests that local cues from both the implanted scaffold/cell micro- and surrounding macroniche may act in concert to promote cellular survival and the in vivo acquisition of a terminal cell fate, thereby allowing for functional engraftment of pluripotent cells into regenerating tissue.