The limitations of graft material, and surgical sites for autografts in bone defects treatment have become a significant challenge in bone tissue engineering. Phytocompounds markedly affect bone metabolism by activating the osteogenic signaling pathways. The present study investigated the biocompatibility of the bio-composite thermo-responsive hydrogels consisting of chitosan (CS), and methylcellulose (MC) encapsulated with veratric acid (VA) as a restorative agent for bone defect treatment. The spectroscopy analyses confirmed the formation of CS/MC hydrogels and VA encapsulated CS/MC hydrogels (CS/MC-VA). Molecular analysis of the CS-specific MC decamer unit with VA complex exhibited a stable integration in the system. Further, Runx2 (runt-related transcription factor 2) was found in the docking mechanism with VA, indicating a high binding affinity towards the functional site of the Runx2 protein. The formulated CS/MC-VA hydrogels exhibited biocompatibility with the mouse mesenchymal stem cells, while VA promoted osteogenic differentiation in the stem cells, which was verified by calcium phosphate deposition through the von Kossa staining. The study results suggest that CS/MC-VA could be a potential therapeutic alternative source for bone regeneration.