Bone defects can originate from a variety of causes, including trauma, cancer, congenital deformity, and surgical reconstruction. Success of the current “gold standard” treatment (i.e., autologous bone grafts) is greatly influenced by insufficient or inappropriate bone stock. There is thus a critical need for the development of new, engineered materials for bone repair. This review describes the use of natural and synthetic hydrogels as scaffolds for bone tissue engineering. We discuss many of the advantages that hydrogels offer as bone repair materials, including their potential for osteoconductivity, biodegradability, controlled growth factor release, and cell encapsulation. We also discuss the use of hydrogels in composite devices with metals, ceramics, or polymers. These composites are useful because of the low mechanical moduli of hydrogels. Finally, the potential for thermosetting and photo-cross-linked hydrogels as three-dimensionally (3D) printed, patient-specific devices is highlighted. Three-dimensional printing enables controlled spatial distribution of scaffold materials, cells, and growth factors. Hydrogels, especially natural hydrogels present in bone matrix, have great potential to augment existing bone tissue engineering devices for the treatment of critical size bone defects.