In addition to a biocompatible scaffold and an osteogenic cell population, tissue‐engineered bone requires an appropriate vascular bed to overcome the obstacle of nutrient and oxygen transport in the 3D structure. We hypothesized that the addition of endothelial cells (ECs) may improve osteogenesis and prevent necrosis of engineered bone via effective neovascularization. Osteoblasts and ECs were differentiated from bone marrow of BALB/c mice, and their phenotypes were confirmed prior to implantation. Cylindrical porous polycaprolactone (PCL)‐hydroxyapatite (HA) scaffolds were synthesized. ECs were seeded on scaffolds followed by seeding of osteoblasts in the EC‐OB group. In the OB group, scaffolds were only seeded with osteoblasts. The cell‐free scaffolds were denoted as control group. A 0.4‐cm‐long segmental femur defect was established and replaced with the grafts. The grafts were evaluated histologically at 6 weeks postimplantation. In comparison with the OB group, the EC‐OB group resulted in a widely distributed capillary network, osteoid generated by osteoblasts and absent ischemic necroses. Pre‐seeding scaffold with ECs effectively promoted neovascularization in grafts, prevented the ischemic necrosis, and improved osteogenesis. The integration of bone marrow‐derived ECs and osteoblasts in porous scaffold is a useful strategy to achieve engineered bone. © 2008 Orthopaedic Research Society. Published by Wiley Periodicals, Inc. J Orthop Res 26:1147–1152, 2008