The use of hydrogels for bone regeneration has been limited due to their inherent low modulus to support cell adhesion and proliferation as well as their susceptibility to bacterial infections at the wound site. To overcome these limitations, we evaluated multifunctional polysaccharide hydrogels of varying stiffness to obtain the optimum stiffness at which the gels (1) induce proliferation of human dermal fibroblasts, human umbilical vascular endothelial cells (HUVECs), and murine preosteoblasts (MC3T3-E1), (2) induce osteoblast differentiation and mineralization, and (3) exhibit an antibacterial activity. Rheological studies demonstrated that the stiffness of hydrogels made of a polysaccharide blend of methylcellulose, chitosan, and agarose was increased by crosslinking the chitosan component to different extents with increasing amounts of genipin. The gelation time decreased (from 210 to 60 min) with increasing genipin concentrations. Proliferation of HUVECs decreased by 10.7 times with increasing gel stiffness, in contrast to fibroblasts and osteoblasts, where it increased with gel stiffness by 6.37 and 7.8 times, respectively. At day 14 up to day 24, osteoblast expression of differentiation markers-osteocalcin, osteopontin-and early mineralization marker-alkaline phosphatase, were significantly enhanced in the 0.5% (w/v) crosslinked gel, which also demonstrated enhanced mineralization by day 25. The antibacterial efficacy of the hydrogels decreased with the increasing degree of crosslinking as demonstrated by biofilm formation experiments, but gels crosslinked with 0.5% (w/v) genipin still demonstrated significant bacterial inhibition. Based on these results, gels crosslinked with 0.5% (w/v) genipin, where 33% of available groups on chitosan were crosslinked, exhibited a stiffness of 502±64.5 Pa and demonstrated the optimal characteristics to support bone regeneration.