The generation of effective tissue engineered bone grafts requires efficient exchange of nutrients and mechanical stimulus. Bioreactors provide a manner in which this can be achieved. We have recently developed a biaxial rotating bioreactor with efficient fluidics through in-silico modeling. Here we investigated its performance for generation of highly osteogenic bone graft using polycaprolactone-tricalcium phosphate (PCL-TCP) scaffolds seeded with human fetal mesenchymal stem cell (hfMSC). hfMSC scaffolds were cultured in either bioreactor or static cultures, with assessment of cellular viability, proliferation and osteogenic differentiation in vitro and also after transplantation into immunodeficient mice. Compared to static culture, bioreactor-cultured hfMSC scaffolds reached cellular confluence earlier (day 7 vs. day 28), with greater cellularity (2x, p<0.01), and maintained high cellular viability in the core, which was 2000 microm from the surface. In addition, bioreactor culture was associated with greater osteogenic induction, ALP expression (1.5x p<0.01), calcium deposition (5.5x, p<0.001) and bony nodule formation on SEM, and in-vivo ectopic bone formation in immunodeficient mice (3.2x, p<0.001) compared with static-cultured scaffolds. The use of biaxial bioreactor here allowed the maintenance of cellular viability beyond the limits of conventional diffusion, with increased proliferation and osteogenic differentiation both in vitro and in vivo, suggesting its utility for bone tissue engineering applications.