Bone defect regeneration is a complex process that involves the coordination of a variety of different type of cells. As bone tissues are innervated and rich in nerve fibers, the neuropeptides released from various never fibers could regulate bone development, metabolism and remodeling. Among all the neuropeptides, Vasoactive intestinal peptide (VIP) could modulate the functions of both osteoblasts and osteoclasts, and may play a vital role in bone marrow mesenchymal stem cells (BMSCs) osteogenesis during bone repair. In present study, we investigated the role of VIP in bone formation and the mechanisms of VIP in mediating BMSCs osteogenic differentiation, as well as its possibility in clinical application of bone defect reconstruction. Our in vitro study results indicated that VIP promoted BMSCs osteogenic differentiation by activating Wnt/β-catenin signaling pathway in BMSCs. VIP could also stimulate tube formation of EA.hy926 endothelial cell and increase VEGF expression in BMSCs. Furthermore, in the rat skull defect model, VIP-conjugated functionalized hydrogel significantly enhanced cranial bone defect repair comparing to the control group, with increased bone formation and angiogenesis. Taken together, as a member of neuropeptides, VIP could promote the BMSCs osteogenesis and angiogenesis differentiation in vitro and stimulate bone repair in vivo by activating Wnt/β-catenin signaling pathway. The knowledge obtained from this study emphasized the close association between innervation and bone repair process, and VIP may be a potential therapeutic agent for augmenting bone repair.