Scaffold-based interfacial tissue engineering aims to not only provide the structural and mechanical framework for cellular growth and tissue regeneration, but also direct cell behavior. Due to the disparity in composition of the osteochondral (cartilage and bone) interface, this work has developed a novel biomimetic biphasic nanocomposite scaffold integrating two biocompatible polymers containing tissue-specific growth factor-encapsulated core-shell nanospheres. Specifically, a poly(caprolactone) (PCL)-based bone layer was successfully integrated with a poly(ethylene glycol) (PEG) hydrogel cartilage layer. In addition, a novel nanosphere fabrication technique for efficient growth factor encapsulation and sustained delivery via a wet coaxial electrospray technique was developed. Human bone marrow mesenchymal stem cell (hMSC) adhesion, osteogenic, and chondrogenic differentiation were evaluated. Our in vitro results showed significantly improved hMSC adhesion and differentiation in bone and cartilage layers, respectively. Studies have demonstrated promising results with novel biphasic nanocomposite scaffold for osteochondral tissue regeneration, thus, warranting further studies. (c) 2013 American Institute of Chemical Engineers AIChE J 60: 432-442, 2014