There is a demonstrated clinical need for alternatives of autologous fresh bone graft with excellent biological performance in osteoconductivity, osteoinductivity, and osteogenicity. We previously developed a collagen microencapsulation technology entrapping bone marrow-derived mesenchymal stem cells (MSCs) in a biomimetic collagen fiber meshwork and produced injectable collagen-MSC microspheres. In this study, we hypothesize that injectable microspheres with osteoconductivity, osteogenicity, and osteoinductivity can be fabricated by differentiating the encapsulated MSCs, from either human or mouse sources, toward osteogenic lineages in these three-dimensional microspheres. The osteogenicity, osteoconductivity, and osteoinductivity of the microspheres were evaluated in vitro. Osteogenic markers of the differentiating MSCs including alkaline phosphatase and calcium deposition showed positive staining. Osteoconductivity of the collagen meshwork in the microsphere was demonstrated by the presence of calcium phosphate deposits among the collagen fibers and by the significantly increased calcium content extracted from the microspheres. Moreover, osteoinductivity of the MSC-encapsulated microspheres was demonstrated by the ability to induce osteogenic differentiation of undifferentiated MSCs in both contact and noncontact coculture. This study contributes toward the future development of injectable alternatives for fresh bone grafts using autologous MSCs.