Background: Traditional high-speed mechanical osteotomes cause substantial thermal and mechanical trauma, impairing bone healing. Erbium-doped yttrium-aluminum-garnet (Er:YAG) lasers, with water-mediated non-contact ablation, offer precise osteotomy potential with minimal collateral damage. This study demonstrated the feasibility of Er:YAG laser use for complex osteotomies and elucidated its multi-scale biological impacts on bone. Methods: A custom Er:YAG laser performed Z/arc-shaped osteotomies on fresh ovine bone (oscillating saw as control); paired rat tibial osteotomies; and compared laser vs. saw resection. Osteotomy surfaces were characterized by SEM/micro-CT; histological staining quantified thermal/mechanical damage. Bone marrow-derived mesenchymal stem cell (BMSC) adhesion, viability, and infiltration on cut surfaces were evaluated via LSCM. Result: In the ex vivo ovine model, the Er:YAG laser enabled precise execution of complex osteotomies (Z-shaped and arc-shaped), producing significantly narrower gaps than the oscillating saw (1.14 mm vs. 2.70 mm, p < 0.001) with high geometric fidelity and smooth surfaces free of burrs, micro-cracks, or debris. In the in vivo rat model, laser ablation simultaneously minimized both thermal and mechanical damage at the osteotomy interface: it reduced the thermal damage depth (154 vs. 592 µm, p < 0.001) and empty lacunae rate (16.8% vs. 41.8%, p < 0.001) while completely avoiding the mechanical damage zone (297 µm) induced by sawing. Furthermore, the laser-ablated surface established a highly bioactive interface, which significantly enhanced the adhesion (606 vs. 389 cells), viability (86.9% vs. 46.6%), and infiltration depth (196 vs. 75 µm) of bone marrow-derived mesenchymal stem cells (all p < 0.001). Conclusions: In conclusion, this proof-of-concept study demonstrates that the Er:YAG laser has the potential to enable precise bone resection while preserving microstructure. By establishing a pro-regenerative microenvironment, this technology shows promise as a biologically favorable alternative to conventional sawing, although further technical refinement and long-term validation are essential for its clinical translation.