There is an increasing demand for an affordable and easy-to-fabricate material to help patients having a long bone gap. In this paper, we describe the biomimetic synthesis of Hap–Gel in situ nanocomposite powders with varied proportions. Their biocompatibility and bone regeneration abilities were assessed on a rabbit model. The use of Hap crystals and Gel molecule, the soluble form of bone protein, makes the nanocomposites comparable to natural bone in constituents. The application of biomimetic principles improves crystal morphology and the interaction of Hap crystals with the Gel molecules as seen through in vitro characterizations. Out of the various compositions studied, one with 80:20 proportions of Hap to Gel proved to be closest to the characteristics of natural bone. The immunological response to this composite, assessed through intradermal inoculation, did not reveal any reaction. The in vivo implantation studies in the femoral condyle of the animals, as assessed by serial post-operative follow-up radiography and the histological evaluation, revealed a good biocompatibility and bone-regeneration ability of the material. Thus, nanocomposites of Hap–Gel have a great potential for serving as an effective and affordable biomaterial for bone grafting applications.