Tissue engineering approaches for bone repair have rapidly evolved due to the development of novel biofabrication technologies, providing an opportunity to fabricate anatomically-accurate living implants with precise placement of specific cell types. However, limited availability of biomaterial inks, that can be 3D-printed with high resolution, while providing high structural support and the potential to direct cell differentiation and maturation towards the osteogenic phenotype, remains an ongoing challenge. Aiming towards a multifunctional biomaterial ink with high physical stability and biological functionality, this work describes the development of a nanocomposite biomaterial ink (Mg-PCL) comprising of magnesium hydroxide nanoparticles (Mg) and polycaprolactone (PCL) thermoplastic for 3D printing of strong and bioactive bone regenerative scaffolds. We characterised the Mg nanoparticle system and systematically investigated the cytotoxic and osteogenic effects of Mg supplementation to human mesenchymal stromal cells (hMSCs) 2D-cultures. Next, we prepared Mg-PCL biomaterial ink using a solvent casting method, and studied the effect of Mg over mechanical properties, printability and scaffold degradation. Furthermore, we delivered MSCs within Mg-PCL scaffolds using a gelatin-methacryloyl (GelMA) matrix, and evaluated the effect of Mg over cell viability and osteogenic differentiation. Nanocomposite Mg-PCL could be printed with high fidelity at 20 wt% of Mg content, and generated a mechanical reinforcement between 30%–400% depending on the construct internal geometry. We show that Mg-PCL degrades faster than standard PCL in an accelerated-degradation assay, which has positive implications towards in vivo implant degradation and bone regeneration. Mg-PCL did not affect MSCs viability, but enhanced osteogenic differentiation and bone-specific matrix deposition, as demonstrated by higher ALP/DNA levels and Alizarin Red calcium staining. Finally, we present proof of concept of Mg-PCL being utilised in combination with a bone-specific bioink (Sr-GelMA) in a coordinated-extrusion bioprinting strategy for fabrication of hybrid constructs with high stability and synergistic biological functionality. Mg-PCL further enhanced the osteogenic differentiation of encapsulated MSCs and supported bone ECM deposition within the bioink component of the hybrid construct, evidenced by mineralised nodule formation, osteocalcin (OCN) and collagen type-I (Col I) expression within the bioink filaments. This study demonstrated that magnesium-based nanocomposite bioink material optimised for extrusion-based 3D printing of bone regenerative scaffolds provide enhanced mechanical stability and bone-related bioactivity with promising potential for skeletal tissue regeneration.