Bone morphogenetic protein-2 (BMP-2) is a clinically used osteoinductive growth factor. With a short half-life and side effects, alternative delivery approaches are needed. This work examines thiolation of BMP-2 for chemical attachment to a poly(ethylene glycol) hydrogel using thiol-norbornene click chemistry. BMP-2 retained bioactivity post-thiolation and was successfully tethered into the hydrogel. To assess tethered BMP-2 on osteogenesis, MC3T3-E1 preosteoblasts were encapsulated in matrix metalloproteinase (MMP)-sensitive hydrogels containing RGD and either no BMP-2, soluble BMP-2 (5 nM), or tethered BMP-2 (40-200 nM) and cultured in a chemically defined medium containing dexamethasone for 7 days. The hydrogel culture supported MC3T3-E1 osteogenesis regardless of BMP-2 presentation, but tethered BMP-2 augmented the osteogenic response, leading to significant increases in osteomarkers, Bglap and Ibsp. The ratio, Ibsp-to-Dmp1, highlighted differences in the extent of differentiation, revealing that without BMP-2, MC3T3-E1 cells showed a higher expression of Dmp1 (low ratio), but an equivalent expression with tethered BMP-2 and more abundant bone sialoprotein. In addition, this work identified that dexamethasone contributed to Ibsp expression but not Bglap or Dmp1 and confirmed that tethered BMP-2 induced the BMP canonical signaling pathway. This work presents an effective method for the modification and incorporation of BMP-2 into hydrogels to enhance osteogenesis.