The field of tissue engineering has witnessed significant advancements with the advent of hydrogel nanocomposites (HNC), emerging as a highly promising platform for regenerative medicine. HNCs provide a versatile platform that significantly enhances the differentiation of stem cells into specific cell lineages, making them highly suitable for tissue engineering applications. By incorporating nanoparticles, the mechanical properties of hydrogels, such as elasticity, porosity, and stiffness, are improved, addressing common challenges such as short-term stability, cytotoxicity, and scalability. These nanocomposites also exhibit enhanced biocompatibility and bioavailability, which are crucial to their effectiveness in clinical applications. Furthermore, HNCs are responsive to various triggers, allowing for precise control over their chemical properties, which is beneficial in creating 3D microenvironments, promoting wound healing, and enabling controlled drug delivery systems. This review provides a comprehensive overview of the production methods of HNCs and the factors influencing their physicochemical and biological properties, particularly in relation to stem cell differentiation and tissue repair. Additionally, it discusses the challenges in developing HNCs and highlights their potential to transform the field of regenerative medicine through improved mechanotransduction and controlled release systems.