In the present study, a novel terpolymeric hydrogel was developed using sodium hyaluronate (HA), 2-hydroxyethyl acrylate (2-HEA), and poly(ethylene glycol) diacrylate (PEGDA) via free radical polymerization for biomedical applications. To achieve elasticity, swelling ability, porous architecture and sufficient gel strength, hyaluronate was chemically modified by grafting and crosslinking methods using 2-HEA and PEGDA, respectively. The structure and compositions of the fabricated terpolymer (HA-g-p(2-HEA)-x-PEGDA) were verified by FTIR, 1H HR-MAS-NMR, and TGA analyses. The surface morphology and cross-section of the hydrogel was detected by SEM analysis. The gel nature of terpolymer in aqueous medium at 37 °C was confirmed from swelling study, and rheological experiment. Non-cytotoxicity and biocompatibility of the HA-g-p(2-HEA)-x-PEGDA hydrogel were ascertained by in vitro mouse osteoblastic cells (MC3T3) proliferation, and viability studies. Hematoxylin and eosin Y, and Masson's trichrome stainings were performed to show tissue regeneration ability on the prepared hydrogel. In vitro release results of proangiogenic drug-dimethyloxalylglycine (DMOG), and antibiotics-tetracycline (TCN) showed sustained release behaviour from the prepared hydrogel under different pHs at 37 °C. The mathematical models fitted data imply that both DMOG and TCN release follow first order kinetics, while, the release mechanism is primarily controlled by diffusion as well as erosion process. Finally, the novel biocompatible HA-g-p(2-HEA)-x-PEGDA gel, which showed sustained drugs release, and regeneration ability of extracellular matrix and collagen, could be employed in biomedical applications, especially, for the delivery of DMOG/TCN, and in tissue engineering.