Multifunctional porous bone scaffolds that combine reparative and therapeutic features are promising for bone tissue engineering applications. Therefore, we developed freeze-dried scaffolds based on the in-situ synthesis of hydroxyapatite nanoparticles (HAp NPs) within a gelatin-polyvinyl alcohol (PVA)-alginate matrix using a co-precipitation method. Ceftazidime and 5-fluorouracil (5-FU) were used as drug models and were separately loaded into the fabricated scaffolds. The hybrid scaffolds exhibited an ultimate compressive strength of 1.1 MPa and flexible behavior favored for fitting irregular bone defects. 5-FU-loaded scaffolds showed higher bioactive potential within 3 days compared to ceftazidime-loaded scaffolds. The scaffolds exhibited a long-term degradation rate, and thereby prolonged release of ceftazidim and 5-FU for up to 28 days. 5-FU-loaded scaffolds showed excellent nearly equal antibacterial activity to ceftazidime-loaded scaffolds against Staphylococcus epidermidis and Escherichia coli. Osteosarcoma cell death was achieved by increased concentrations of ceftazidime and. 5-FU treatment above 300 μg/mL and 250 μg/mL, respectively. The developed scaffolds displayed higher bone formation ability with better osteogenesis in a femoral rat bone defect model compared to the control sample. This work represents a promising solution for bone defect repair and provides insight into the development of multifunctional scaffolds for local chemotherapy and bone tissue engineering applications.