Osteoporosis is the most common chronic metabolic bone disease, and the prevalence of osteoporotic fractures is rapidly increasing with the aging population. While bisphosphonates can reduce bone loss and risk of fracture, these drugs are systemic, rely on long-term use, and patient compliance is low. Recombinant human bone morphogenetic protein-2 (BMP-2) is an FDA-approved protein that can offer a more targeted therapeutic than systemic treatments. DWIVA is a peptide sequence corresponding to the wrist epitope of BMP-2, and DWIVA-functionalized hydrogels feature osteoinductive propertiesin vitro and in vivo. This study reports that self-forming DWIVA-functionalized hydrogels injected into the intramedullary canal of rat femurs induce a local increase in trabecular bone in as little as 2 weeks. Increases in bone volume, trabecular thickness, and trabeculae count from DWIVA-laden hydrogels persist for at least 4 weeks, and the inclusion of mesenchymal stem cells (MSCs) significantly enhances the development of mineralized bone. Histological analysis of decalcified femurs also shows that hydrogel injections containing DWIVA peptide and MSCs stimulate unmineralized bone tissue formation and induce an increased count of osteoblasts and osteoclasts at the injection site after 4 weeks. Overall, the MSC-laden DWIVApeptide-functionalized hydrogels presented rapidly induce targeted bone formation and have the potential to form nascent bone within bones in jeopardy of an osteoporotic fracture such as the femur.