Induced pluripotent stem cells (iPSCs) have great potential due to their proliferation and differentiation capability. The objectives of this study were to generate iPSC-derived mesenchymal stem cells (iPSC-MSCs), and investigate iPSC-MSC proliferation and osteogenic differentiation on calcium phosphate cement (CPC) containing biofunctional agents for the first time. Human iPSCs were derived from marrow CD34+ cells which were reprogrammed by a single episomal vector. iPSCs were cultured to form embryoid bodies (EBs), and MSCs migrated out of EBs. Five biofunctional agents were incorporated into CPC:RGD (Arg-Gly-Asp) peptides, fibronectin (Fn), fibronectin-like engineered polymer protein (FEPP), extracellular matrix Geltrex, and platelet concentrate. iPSC-MSCs were seeded on five biofunctionalized CPCs:CPC-RGD, CPC-Fn, CPC-FEPP, CPC-Geltrex, and CPC-Platelets. iPSC-MSCs on biofunctional CPCs had enhanced proliferation, actin fiber expression, osteogenic differentiation and mineralization, compared to control. Cell proliferation was greatly increased on biofunctional CPCs. iPSC-MSCs underwent osteogenic differentiation with increased alkaline phosphatase, Runx2 and collagen-I expressions. Mineral synthesis by iPSC-MSCs on CPC-Platelets was 3-fold that of CPC control. In conclusion, iPSCs showed high potential for bone engineering. iPSC-MSCs on biofunctionalized CPCs had cell proliferation and bone mineralization that were much better than traditional CPC. iPSC-MSC-CPC constructs are promising to promote bone regeneration in craniofacial/orthopedic repairs.