We present here the biological performance in supporting tissue regeneration of hybrid hydrogels consisting of genetically engineered protein polymers that carry specific features of the natural extracellular matrix, cross-linked with reactive poly(ethylene glycol) (PEG). Specifically, the protein polymers contain the cell adhesion motif RGD, which mediates integrin receptor binding, and degradation sites for plasmin and matrix-metalloproteinases, both being proteases implicated in natural matrix remodeling. Biochemical assays as well as in vitro cell culture experiments confirmed the ability of these protein-PEG hydrogels to promote specific cellular adhesion and to exhibit degradability by the target enzymes. Cell culture experiments demonstrated that proteolytic sensitivity and suitable mechanical properties were critical for three-dimensional cell migration inside these synthetic matrixes. In vivo, protein-PEG matrixes were tested as a carrier of bone morphogenetic protein (rhBMP-2) to heal critical-sized defects in a rat calvarial defect model. The results underscore the importance of fine-tuning material properties of provisional therapeutic matrixes to induce cellular responses conducive to tissue repair. In particular, a lack of rhBMP or insufficient degradability of the protein-PEG matrix prevented healing of bone defects or remodeling and replacement of the artificial matrix. This work confirms the feasibility of attaining desired biological responses in vivo by engineering material properties through the design of single components at the molecular level. The combination of polymer science and recombinant DNA technology emerges as a powerful tool for the development of novel biomaterials.