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Maxillofacial surgeries are facing an increasing need of bone graft materials. The present study focusses on the evaluation of a nano-architectured electrospun polycaprolactone (PCL) - nano-cyrstalline zinc oxide (nZnO) scaffold. A blend of PCL- nZnO was electrospun to develop a nano-porous scaffold. The morphology of the scaffold nanofiber was characterised by scanning electron microscopy. MG63 osteoblastic cells were cultured with the prepared PCL-nZnO and PCL scaffolds. The in-vitro experiments revealed increased biocompatibility, cell proliferation, enhanced alkaline phosphatase (ALP) and calcium levels with upregulated osteo-biomarkers (osteonectin, osteopontin and osteocalcin) in the PCL-nZnO composite scaffold compared to the plain PCL scaffold. In-vivo biocompatibility was assessed by implanting the scaffolds in rabbit femur bone defects. Histology sections from the healing bone defects after one and three months showed enhanced bone formation in PCL-nZnO scaffold implanted defects. This study showed that the developed nano-structured PCL-nZnO composite scaffold has enhanced osteogenicity and could be a potential synthetic bone substitute material for applications in the oral and maxillofacial region.