Maintaining the continuous oxygen supply and proper cell growth before blood vessel ingrowth at the bone defect site are considerably significant issues in bone regeneration. Oxygen-producing scaffolds can supply oxygen and avoid hypoxia leading to expedited bone regeneration. Herein, first oxygen-producing calcium peroxide nanoparticles (CPO NPs) are synthesized, and subsequently, the various amounts of synthesized CPO NPs (0.1, 0.5, and 1wt/v%) loaded in the scaffold composite, which is developed by simple physical blending of chitosan (CS) and polycaprolactone (PCL) polymers. To deliver the synergistic therapeutic effect, dexamethasone (DEX), known for its potential anti-inflammatory and osteogenic properties, is loaded into the nanocomposite scaffolds. The extensive physicochemical characterizations of nanocomposite scaffolds confirm the successful loading of CPO NPs, adequate porous morphology, pore size, hydrophilicity, and biodegradability. In vitro, biological studies support the antibacterial, hemocompatible, and cytocompatible (MG-63 and MC3T3-E1 cells) nature of the material when tested on respective cells. FE-SEM and Energy-dispersive X-ray spectroscopy confirm the successful biomineralization of the scaffolds. Scaffolds also exhibit the sustained release of DEX and efficient protein adsorption. This study revealed that a nanoengineered scaffold loaded with CPO NPs (PCL/CS/DEX/CPO 3) is a suitable candidate for bone tissue regeneration.