Regulation of transgene expression and function is important for gene therapy because it allows complex biological processes to be controlled and monitored. Basic fibroblast growth factor (bFGF) is an effective angiogenic factor and bone regeneration factor; it can induce differentiation of mesenchymal stem cells (MSCs) in vitro and bone regeneration in vivo. Further, exogenous regulation of controllable bFGF expression in the bone regeneration area safely allows bone formation and regeneration. In our study, we constructed a recombinant adeno-associated virus type 2 (rAAV2)-based bFGF gene delivery system, which is regulated by tetracycline or doxycycline (Dox, an analogue of tetracycline). We evaluated the regulatory effects of this system on bFGF transgenic expression in vitro and in vivo. We found that bFGF could increase the mRNA expression levels of osteoblast differentiation factor and the activity of alkaline phosphatase (ALP). Dox could effectively regulate bFGF expression, thus controlling MSC differentiation. After in vivo transplantation of genetically engineered MSCs, animals not treated with Dox showed significant bone formation and angiogenesis compared with the group treated with Dox. Dox may also effectively regulate angiogenesis and bone regeneration in vivo. Therefore, the inducible bFGF system is an effective way of regulating bone regeneration and formation.