Cell interactions with the extracellular matrix play important roles in guiding tissue morphogenesis. The matrix stimulates cells to influence such things as differentiation and the cells actively remodel the matrix via local proteolytic activity. We have designed synthetic hydrogel networks that participate in this interplay: They signal cells via bound adhesion and growth factors, and they also respond to the remodeling influence of cell-associated proteases. Poly(ethylene glycol)-bis-vinylsulfone was crosslinked by a Michael-type addition reaction with a peptide containing three cysteine residues, the peptide sequence being cleavable between each cysteine residue by the cell-associated protease plasmin. Cells were able to invade gel networks that contained adhesion peptides and were crosslinked by plasmin-sensitive peptides, while materials lacking either of these two characteristics resisted cell infiltration. Incorporated bone morphogenetic protein-2 (BMP-2) induced bone healing in a rat model in materials that were both adhesive and plasmin-sensitive, while materials lacking plasmin sensitivity resisted formation of bone within the material. Furthermore, when a heparin bridge was incorporated as a BMP-2 affinity site, mimicking yet another characteristic of the extracellular matrix, statistically improved bone regeneration was observed. © 2004 Wiley Periodicals, Inc.