It is desirable to combine load-bearing and bone regeneration capabilities in a single bone tissue engineering scaffold. For this purpose, we developed a high strength hybrid scaffold using a sintered poly(lactic-
co
-glycolic acid) (PLGA)/nanohydroxyapatite (nHAP) microsphere cavity fitted with gelatin/nHAP cryogel disks in the center. Osteo-conductive/osteo-inductive nHAP was incorporated in 250–500 μm PLGA microspheres at 40% (
w
/
w
) as the base matrix for the high strength cavity-shaped microsphere scaffold, while 20% (
w
/
w
) nHAP was incorporated into gelatin cryogels as an embedded core for bone regeneration purposes. The physico-chemical properties of the microsphere, cryogel, and hybrid scaffolds were characterized in detail. The ultimate stress and Young’s modulus of the hybrid scaffold showed 25- and 21-fold increases from the cryogel scaffold. In vitro studies using rabbit bone marrow-derived stem cells (rBMSCs) in cryogel and hybrid scaffolds through DNA content, alkaline phosphatase activity, and mineral deposition by SEM/EDS, showed the prominence of both scaffolds in cell proliferation and osteogenic differentiation of rBMSCs in a normal medium. Calcium contents analysis, immunofluorescent staining of collagen I (COL I), and osteocalcin (OCN) and relative mRNA expression of COL I, OCN and osteopontin (OPN) confirmed in vitro differentiation of rBMSCs in the hybrid scaffold toward the bone lineage. From compression testing, the cell/hybrid scaffold construct showed a 1.93 times increase of Young’s modulus from day 14 to day 28, due to mineral deposition. The relative mRNA expression of osteogenic marker genes COL I, OCN, and OPN showed 5.5, 18.7, and 7.2 folds increase from day 14 to day 28, respectively, confirming bone regeneration. From animal studies, the rBMSCs-seeded hybrid constructs could repair mid-diaphyseal tibia defects in rabbits, as evaluated by micro-computed tomography (μ-CT) and histological analyses. The hybrid scaffold will be useful for bone regeneration in load-bearing areas.