The objective of the present investigation was to assess the potential ofmagnesium oxide nanoparticle (MgONP)-loaded electrospun polycaprolactone (PCL) polymer composites as a bone-soft tissue engineering scaffold. MgONPs were synthesized using a hydroxide precipitation sol-gel method and characterized using field emission gun-scanning electronmicroscopy/energy-dispersive x-ray spectroscopy (FEG-SEM/EDS), field emission gun-transmission electron microscopy (FEG-TEM), andx-ray diffraction (XRD) analysis. PCL and MgO-PCL nanocomposite fibers were fabricated using electrospinning with trifluoroethanol as solvent at 19 kV applied voltage and 1.9 mlh(-1) flow rate as optimized process parameters, andwere characterized by FEG-TEM, FEG-SEM/EDS, XRD, and differential scanning calorimetry analyses. Characterization studies of as-synthesized nanoparticles revealed diffraction peaks indexed to various crystalline planes peculiar toMgOparticles with hexagonal and cubical shape, and 40-60 nmsize range. Significant improvement inmechanical properties (tensile strength and elastic modulus) of nanocomposites was observed as compared to neat polymer specimens (fourfold and threefold, respectively), due to uniform dispersion of nanofillers along the polymer fiber length. There was a remarkable bioactivity shown by nanocomposite scaffolds in immersion test, as indicated by formation of surface hydroxyapatite layer by the thirddayof incubation. MgO-loaded electrospun PCL mats showed enhanced in-vitro biological performancewith osteoblast-like MG-63 cells in terms of adhesion, proliferation, andmarked differentiation marker activity owing to greater surface roughness, nanotopography, and hydrophilicity facilitating higher protein adsorption. In-vivo subcutaneous implantation study in SpragueDawley rats revealed initial moderate inflammatory tissue response near implant site at the secondweektimepoint that subsided later (eighth week) with no adverse effect on vital organ functionalities as seen in histopathological analysis supported by serum biochemical and hematological parameterswhich did not deviate significantly from normal physiological range, indicating good biocompatibility in-vivo. Thus, MgO-PCL nanocomposite electrospun fibers have potential as an efficient scaffold material for bone-soft tissue engineering applications.