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Bone tissue engineering offers perhaps the most attractive treatment option for bone repair/regeneration as it eliminates complications of other bone grafting options (i.e., availability and immunogenicity issues of autografts and allografts, respectively). However, scaffold-based bone tissue engineering is largely limited by inadequate vascaularization, and as a result, bone formation is often restricted to the construct's periphery. In this study, we offer a two-pronged approach to overcome periphery-limited bone and vascular formation. We have developed optimally designed, mechanically strong, biodegradable scaffolds with increased porosity and interconnectivity. We have also identified and isolated superior, clinically-relevant cell populations (peripheral blood-derived endothelial progenitor cells (EPCs), and bone marrow-derived mesenchymal stem cells (MSCs)). In combination, we have developed a synthetic graft system suitable for the regeneration of vascularized bone.