There is significant interest in the development of injectable carriers for cell transplantation to engineer bony tissues. In this study, we hypothesized that adhesion ligands covalently coupled to hydrogel carriers would allow one to control pre-osteoblast cell attachment, proliferation, and differentiation. Modification of alginate with an RGD-containing peptide promoted osteoblast adhesion and spreading, whereas minimal cell adhesion was observed on unmodified hydrogels. Raising the adhesion ligand density increased osteoblast proliferation, and a minimum ligand density (1.5-15 femtomoles/cm2) was needed to elicit this effect. MC3T3-E1 cells demonstrated increased osteoblast differentiation with the peptide-modified hydrogels, as confirmed by the up-regulation of bone-specific differentiation markers. Further, transplantation of primary rat calvarial osteoblasts revealed statistically significant increases of in vivo bone formation at 16 and 24 weeks with G4RGDY-modified alginate compared with unmodified alginate. These findings demonstrate that biomaterials may be designed to control bone development from transplanted cells.