Large bone defects often require the use of autograft, allograft, or synthetic bone graft augmentation; however, these treatments can result in delayed osseous integration. A tissue engineering strategy would be the use of a scaffold that could promote the normal fracture healing process of endochondral ossification, where an intermediate cartilage phase is later transformed to bone. This study investigated vanadyl acetylacetonate (VAC), an insulin mimetic, combined with a fibrous composite scaffold, consisting of polycaprolactone with nanoparticles of hydroxyapatite and beta-tricalcium phosphate, as a potential bone tissue engineering scaffold. The differentiation of human mesenchymal stem cells (MSCs) was evaluated on 0.05 and 0.025 wt% VAC containing composite scaffolds (VAC composites) in vitro using three different induction media: osteogenic (OS), chondrogenic (CCM), and chondrogenic/osteogenic (C/O) media, which mimics endochondral ossification. The controlled release of VAC was achieved over 28 days for the VAC composites, where approximately 30% of the VAC was released over this period. MSCs cultured on the VAC composites in C/O media had increased alkaline phosphatase activity, osteocalcin production, and collagen synthesis over the composite scaffold without VAC. In addition, gene expressions for chondrogenesis (Sox9) and hypertrophic markers (VEGF, MMP-13, and collagen X) were the highest on VAC composites. Almost a 1000-fold increase in VEGF gene expression and VEGF formation, as indicated by immunostaining, was achieved for cells cultured on VAC composites in C/O media, suggesting VAC will promote angiogenesis in vivo. These results demonstrate the potential of VAC composite scaffolds in supporting endochondral ossification as a bone tissue engineering strategy.