Patients diagnosed with osteosarcoma are currently treated with intravenous injections of anticancer agents after tumor resection. However, due to remaining neoplastic cells at the site of tumor removal, cancer recurrence often occurs. Successful bone regeneration combined with the control of residual cancer cells presents a challenge for tissue engineering. Cyclodextrins loaded with chemotherapeutic drugs reversibly release the drugs over time. Hydroxyapatite bone biomaterials coated with doxorubicin-loaded cyclodextrin should release the drug with time after implantation directly at the original tumor site and may be a way to eliminate residual neoplastic cells. In the present study, we have carried out in vitro studies to evaluate such a drug-delivery system and have shown that doxorubicin released from cyclodextrin-coated hydroxyapatite retained biological activity and exhibited longer and higher cytotoxic effects on both cancer (osteosarcoma cells) and healthy cells (primary osteoblasts and endothelial cells) compared to biomaterials without cyclodextrin loaded with doxorubicin. Furthermore, doxorubicin released from biomaterials with cyclodextrin moderately induced the expression of tumor suppressor protein p53 whereas p21 expression was similar to control cells. In addition, hypoxic conditions, which occur after implantation until blood-flow to the area is regenerated, protected endothelial cells and primary osteoblasts from doxorubicin-induced cytotoxicity. This chemo-protective effect was far less prominent for the osteosarcoma cells. These findings indicate that a hydroxyapatite-cyclodextrin-doxorubicin chemotherapeutic strategy may enhance the drug-targeting effect on tumor cells while protecting the more sensitive healthy cells for a period of time after implantation. A successful integration of such a drug delivery system might allow healthy cells to initially survive during the doxorubicin exposure period, while eliminating residual neoplastic cells.