As an efficient controlled release system for rhBMP-2, a functional nanoparticle-hydrogel complex, incorporated with matrix metalloproteinase(MMP) sensitive peptide cross-linker, was developed and used as a bone transplant. In vivo bone formation was evaluated by soft x-ray, histology, alkaline phosphatase(ALP) activity and mineral contents analysis, based on the rat calvarial critical size defect(8mm in diameter) model. Significantly, effective bone regeneration was achieved with the rhBMP-2 loaded MMP sensitive hyaluronic acid(HA) based hydrogel-Nanoparticles(NP) complex, as compared to only MMP HA, the MMP HA-NP without rhBMP-2, or even with the rhBMP-2. These improvements included the formation pattern of bone and functional marrow, the degree of calcium quantification, and the ALP activity. These results indicate that the MMP sensitive HA with nano-particle complex can be a promising candidate for a new bone defect replacement matrix, and an enhanced rhBMP-2 scaffold.