Stem cells are an essential consideration in the fields of tissue engineering and regenerative medicine. Understanding how nanoengineered biomaterials and mesenchymal stem cells (MSCs) interact is crucial for their role in bone regeneration. Taking advantage of the structural stability of selenium nanoparticles (Se-NPs) and biological properties of natural polymers, Se-NPs-functionalized, injectable, thermoresponsive hydrogels with an interconnected molecular structure were prepared to identify their role in the osteogenic differentiation of different types of mesenchymal stem cells. Further, comprehensive characterization of their structural and biological properties was performed. The results showed that the hydrogels undergo a sol to gel transition with the help of β-glycerophosphate, while functionalization with Se-NPs significantly enhances their biological response through stabilizing their polymeric structure by forming Se-O covalent bonds. Further results suggest that Se-NPs enhance the differentiation of MSCs toward osteogenic lineage in both the 2D as well as 3D. We demonstrated that the Se-NPs-functionalized hydrogels could enhance the differentiation of osteoporotic bone-derived MSCs. We also focused on specific cell surface marker expression (CD105, CD90, CD73, CD45, CD34) based on the exposure of healthy rats' bone marrow-derived stem cells (BMSCs) to the Se-NP-functionalized hydrogels. This study provides essential evidence for pre-clinical/clinical applications, highlighting the potential of the nanoengineered biocompatible elastic hydrogels for bone regeneration in diseased bone.