A bone morphogenetic protein-2(BMP-2) derived synthetic oligopeptide, S[PO4]KIPKASSVPTELSAI-STLYLDDD(P24), has shown great potential for facilitating bone regeneration. However, P24 cannot be directly used onto bone defects, while a continuous sustained delivery of P24 may lead to a better formation of bone tissue. Based on this issue, we have developed a sustained delivery system incorporating P24-loaded poly(lactide-co-glycolide) (PLGA) microspheres and nano-hydroxyapatite(n-HA) into the composite hydrogel. The P24-contained compound material was characterized with NMR, FTIR and SEM to demonstrate the formation of compound structure containing P24, PLGA and n-HA. A continuous drug release of P24 was observed for over 60 d that evidently enhanced the efficiency in promoting the proliferation of MC3T3-E1 cells and the secrete of alkaline phosphatase(ALP) in vitro. Moreover, the osteoinduction effect of the hydrogel system with P24 peptide microspheres was demonstrated in vivo and manifested by the result of immunohistochemistry. This novel injectable composite hydrogel is expected to be applied to improving the bone defect treatment in bone tissue engineering.