For bone tissue engineering, stem cell-based therapy has become a promising option. Recently, cell transplantation supported by polymeric carriers has been increasingly evaluated. Herein, we encapsulated human olfactory ectomesenchymal stem cells (OE-MSC) in the collagen hydrogel system, and their osteogenic potential was assessed in vitro and in vivo conditions. Collagen type I was composed of four different concentrations of (4 mg/mL, 5 mg/mL, 6 mg/mL, 7 mg/mL). SDS-Page, FTIR, rheologic test, resazurin assay, live/dead assay, and SEM were used to characterize collagen hydrogels. OE-MSCs encapsulated in the optimum concentration of collagen hydrogel and transplanted in rat calvarial defects. The tissue samples were harvested after 4- and 8-weeks post-transplantation and assessed by optical imaging, micro CT, and H&E staining methods. The highest porosity and biocompatibility were confirmed in all scaffolds. The collagen hydrogel with 7 mg/mL concentration was presented as optimal mechanical properties close to the naïve bone. Furthermore, the same concentration illustrated high osteogenic differentiation confirmed by real-time PCR and alizarin red S methods. Bone healing has significantly occurred in defects treated with OE-MSCs encapsulated hydrogels in vivo. As a result, OE-MSCs with suitable carriers could be used as an appropriate cell source to address clinical bone complications.