Synthetic bone graft substitutes based on composites consisting of a polymer and a calcium-phosphate (CaP) ceramic are developed with the aim to satisfy both mechanical and bioactivity requirements for successful bone regeneration. In the present study, we have employed extrusion to produce a composite consisting of 50 wt.% poly(D,L-lactic acid) (PLA) and 50 wt.% nano-sized hydroxyapatite (HA) powder, achieving homogeneous distribution of the ceramic within the polymeric phase. In vitro, in both a simulated physiological saline (SPS) and a simulated body fluid (SBF), a greater weight loss was observed for PLA/HA than for PLA particles upon 12-week immersion. Furthermore, in SPS, a continuous release of calcium and phosphate from the composite was measured, whereas in SBF, decrease of the amount of the two ions in the solution was observed both for PLA and PLA/HA accompanied with the formation of a CaP layer on the surface. In vitro characterization of the composite bioactivity was performed by culturing human mesenchymal stromal cells (hMSCs) and assessing proliferation and osteogenic differentiation, with PLA as a control. Both PLA/HA composite and PLA control were shown to support hMSCs proliferation over a period of two weeks. In addition, the composite significantly enhanced alkaline phosphatase (ALP) activity of hMSCs in osteogenic medium as compared with the polymer control. A novel implant design was employed to develop implants from dense, extruded materials, suitable for testing osteoinductivity in vivo. In a preliminary study in dogs, PLA/HA composite implants induced heterotopic bone formation upon 12-week intramuscular implantation in all animals, in contrast to PLA control, which was not osteoinductive. Unlike in vitro, a more pronounced degradation of PLA was observed in vivo as compared with PLA/HA composite.