Staphylococcus aureus (SA)-induced osteomyelitis causes refractory infected bone defects characterized by impaired osteogenesis and excessive inflammatory bone destruction. Pyroptosis has emerged as an important driver of infection-related tissue injury, but the upstream regulators in osteoblasts and effective local therapeutic strategies remain poorly defined. This study investigated the role of the MIF-CD74/PI3K/AKT axis in SA-mediated osteoblast dysfunction and evaluated the ISO-1 sustained-release hydrogel for repairing infected bone defects. MIF expression was examined in human osteomyelitis sample. Bone destruction, inflammation, and osteogenesis were compared between wild-type and Mif−/− mice using micro-CT, histology, ELISA, RT-qPCR, and immunohistochemistry. In vitro, SA-infected mouse bone marrow mesenchymal stem cells (mBMSCs) were used to assess proliferation, osteogenic differentiation, and pyroptosis, while MIF and CD74 were silenced with siRNA. RNA sequencing (RNA-seq) and co-immunoprecipitation (Co-IP) were employed to identify MIF downstream receptors and pathways, and PI3K/AKT involvement was verified using CD74 overexpression and the PI3K inhibitor LY294002. An injectable, photocrosslinkable ISO-1@β-CD/GelMA hydrogel was fabricated and characterized for structure, mechanics, and pH-responsive drug release, then implanted into rat femoral infected bone defects after debridement to evaluate bone regeneration and local inflammatory modulation. MIF was markedly upregulated in human osteomyelitis and its genetic deletion in mice significantly attenuated SA-induced bone loss, preserved trabecular microarchitecture, enhanced osteogenic marker expression, and reduced local pro-inflammatory cytokines. SA infection suppressed mBMSC proliferation and osteogenic differentiation while activating NLRP3/ASC/GSDMD-dependent pyroptosis. MIF or CD74 knockdown partially restored osteogenesis and decreased inflammatory cytokine release and pyroptotic markers. RNA-seq and Co-IP identified CD74 as a key MIF receptor, with PI3K/AKT as a critical downstream pathway regulating osteoblast fate. The ISO-1@β-CD/GelMA hydrogel showed favorable injectability, mechanical stability, and sustained ISO-1 release, and significantly improved bone volume, microarchitecture, and inflammatory microenvironment in rat infected bone defects. SA-induced osteomyelitis disrupts bone homeostasis via the MIF-CD74/PI3K/AKT axis, thereby suppressing osteogenesis and promoting NLRP3/ASC/GSDMD-mediated osteoblast pyroptosis. Targeting MIF with an ISO-1 sustained-release hydrogel remodels the inflammatory and pyroptotic microenvironment, enhances osteogenic differentiation, and effectively promotes repair of infected bone defects, providing a promising translational platform for osteomyelitis-related bone regeneration.