Abstract Tissue engineering combined with gene therapy represents a promising approach for bone regeneration. The Hypoxia-inducible factor-1α (HIF-1α) gene is a pivotal regulator of vascular reactivity and angiogenesis. Our recent study has showed that HIF-1α could promote osteogenesis of bone mesenchymal stem cells (BMSCs) using a gene point mutant technique. To optimize the function of HIF-1α on inducing stem cells, another constitutively active form of HIF-1α (CA5) was constructed with truncation mutant method and its therapeutic potential on critical-sized bone defects was evaluated with calcium-magnesium phosphate cement (CMPC) scaffold in a rat model. BMSCs were treated with Lenti (lentivirus) -CA5, Lenti-WT (wild-type HIF-1α), and Lenti-LacZ. These genetically modified BMSCs were then combined with CMPC scaffolds to repair critical-sized calvarial defects in rats. The results showed that the overexpression of HIF-1α obviously enhanced the mRNA and protein expression of osteogenic markers in vitro and robust new bone formation with the higher local bone mineral density (BMD) was found in vivo in the CA5 and WT groups. Furthermore, CA5 showed significantly greater stability and osteogenic activity in BMSCs compared with WT. These data suggest that BMSCs transduced with truncation mutanted HIF-1α gene can promote the overexpression of osteogenic markers. CMPC could serve as a potential substrate for HIF-1α gene modified tissue engineered bone to repair critical sized bony defects.