The need for bone repair has increased as the population ages. The objectives of this study were to (1) develop a novel biofunctionalized and macroporous calcium phosphate cement (CPC) containing alginate-fibrin microbeads encapsulating human umbilical cord mesenchymal stem cells (hUCMSCs); and (2) investigate hUCMSC proliferation and osteogenic differentiation inside CPC for the first time. Macroporous CPC was developed using calcium phosphate powders, chitosan, and gas-foaming porogen. Five types of CPCs were fabricated: CPC control, CPC + 0.05% fibronectin (Fn), CPC + 0.1% Fn, CPC + 0.1% Arg-Gly-Asp (RGD), and CPC + 0.1% Fn + 0.1% RGD. Alginate-fibrin microbeads containing 106 hUCMSCs/mL were encapsulated in the CPC paste. After CPC had set, the degradable microbeads released hUCMSCs inside CPC. hUCMScs proliferated inside CPC, with cell density at 21 d being 4-fold that at 1 d. CPC + 0.1% RGD had the highest cell density, which was 4-fold that of CPC control. The released cells differentiated into the osteogenic lineage and synthesized bone minerals. hUCMSCs inside the CPC + 0.1% RGD construct had gene expressions of alkaline phosphatase (ALP), osteocalcin (OC) and collagen I, which were twice those of CPC control. Mineral synthesis by hUCMSCs inside the CPC + 0.1% RGD construct was 2-fold that in CPC control. RGD and Fn incorporation in CPC did not compromise the strength of CPC, which matched the reported strength of cancellous bone. In conclusion, degradable microbeads released the hUCMSCs which proliferated, differentiated and synthesized minerals inside the macroporous CPC for the first time. CPC with RGD greatly enhanced cell functions. The novel biofunctionalized and macroporous CPC-microbead-hUCMSC construct is promising for bone tissue engineering applications.