Hydrogels composed of natural biopolymers are attractive for tissue regeneration applications owing to their advantages such as biocompatibility and ease of administration, etc.. Yet, the low oxygen level and the crosslinked network inside bulk hydrogels, as well as the hypoxic status in defect areas, hamper cell viability, function, and eventual tissue repair. Herein, based on Ca-crosslinked alginate hydrogel, oxygen-generating calcium peroxide (CaO) was introduced, which could provide a dynamic crosslinking alongside the CaO decomposition. Compared to the CaCl-crosslinked alginate hydrogel, bone marrow mesenchymal stromal cells cultured with CaO-contained system displayed remarkably improved biological behaviors. Furthermore, in vivo evaluations were carried out on a subcutaneous implantation in rats, and the results demonstrated the importance of the local oxygen availability in a series of crucial events for tissue regeneration, such as activating cell viability, migration, angiogenesis, and osteogenesis. In summary, the obtained Ca-crosslinked alginate hydrogel achieved a better microenvironment for cell ingrowth and potential tissue regeneration as the CaCl crosslinker being replaced by oxygen-generating CaO nanoparticles, due to its contribution in remedying the local hypoxic condition, promisingly, the release of Ca makes the hydrogel to be a possible candidate scaffold for bone tissue engineering.