Bone defects in patients entail the microenvironment that needs to boost the functions of stem cells (e.g., proliferation, migration, and differentiation) while alleviating severe inflammation induced by high oxidative stress. Biomaterials can help to shift the microenvironment by regulating these multiple events. Here we report multifunctional composite hydrogels composed of photo-responsive gelatin methacryloyl (GelMA) and dendrimer (G3)-functionalized nanoceria (G3@nCe). Incorporation of G3@nCe into GelMA could enhance the mechanical properties of hydrogels and their enzymatic ability to clear reactive oxygen species (ROS). The G3@nCe/GelMA hydrogels supported the focal adhesion of mesenchymal stem cells (MSCs) and further increased their proliferation and migration ability (vs. pristine GelMA and nCe/GelMA). Moreover, the osteogenic differentiation of MSCs was significantly stimulated upon the G3@nCe/GelMA hydrogels. Importantly, the capacity of G3@nCe/GelMA hydrogels to scavenge extracellular ROS enabled MSCs to survive against H2O2-induced high oxidative stress. Transcriptome analysis by RNA sequencing identified the genes upregulated and the signalling pathways activated by G3@nCe/GelMA that are associated with cell growth, migration, osteogenesis, and ROS-metabolic process. When implanted subcutaneously, the hydrogels exhibited excellent tissue integration with a sign of material degradation while the inflammatory response was minimal. Furthermore, G3@nCe/GelMA hydrogels demonstrated effective bone regeneration capacity in a rat critical-sized bone defect model, possibly due to an orchestrated capacity of enhancing cell proliferation, motility and osteogenesis while alleviating oxidative stress.