Perfusion bioreactor plays important role in supporting 3D bone construct development. Scaffolds of chitosan composites have been studied to support bone tissue regeneration from osteogenic progenitor cells including human mesenchymal stem cells (hMSC). In this study, porous scaffolds of hydroxyapatite (H), chitosan (C), and gelatin (G) were fabricated by phase-separation and press-fitted in the perfusion bioreactor system where media flow is configured either parallel or transverse with respect to the scaffolds to investigate the impact of flow configuration on hMSC proliferation and osteogenic differentiation. The in vitro results showed that the interstitial flow in the transverse flow (TF) constructs reduced cell growth during the first week of culture but improved spatial cell distribution and early onset of osteogenic differentiation measured by alkaline phosphatase and expression of osteogenic genes. After 14 days of bioreactor culture, the TF constructs have comparable cell number but higher expression of bone markers genes and proteins compared to the parallel flow constructs. To evaluate ectopic bone formation, the HCG constructs seeded with hMSCs pre-cultured under two flow configurations for 7 days were implanted in CD-1 nude mice. While Masson's Trichrom staining revealed bone formation in both constructs, the TF constructs have improved spatial cell and osteoid distribution throughout the 2.0 mm constructs. The results highlight the divergent effects of media flow over the course of construct development and suggest that the flow configuration is an important parameter regulating the cellular events leading to bone construct formation in the HCG scaffolds.