Smart matrices are required in bone tissueengineered grafts that provide an optimal environment for cells and retain osteo-inductive factors for sustained biological activity. We hypothesized that a slow-degrading heparin-incorporated hyaluronan (HA) hydrogel can preserve BMP-2; while an arterio-venous (A-V) loop can support axial vascularization to provide nutrition for a bioartificial bone graft. HA was evaluated for osteoblast growth and BMP-2 release. Porous PLDLLA-TCP-PCL scaffolds were produced by rapid prototyping technology and applied in vivo along with HA-hydrogel, loaded with either primary osteoblasts or BMP-2. A microsurgically created A-V loop was placed around the scaffold, encased in an isolation chamber in Lewis rats. HA-hydrogel supported growth of osteoblasts over 8 weeks and allowed sustained release of BMP-2 over 35 days. The A-V loop provided an angiogenic stimulus with the formation of vascularized tissue in the scaffolds. Bone-specific genes were detected by real time RT-PCR after 8 weeks. However, no significant amount of bone was observed histologically. The heterotopic isolation chamber in combination with absent biomechanical stimulation might explain the insufficient bone formation despite adequate expression of bone-related genes. Optimization of the interplay of osteogenic cells and osteo-inductive factors might eventually generate sufficient amounts of axially vascularized bone grafts for reconstructive surgery. © Springer Science+Business Media, LLC 2011.