The periosteum is an indispensable part of the bone that nourishes the cortical bone and acts as a repertoire of osteoprogenitor cells. Periosteal damage as a result of traumatic injuries, infections, or surgical assistance in bone surgeries is often associated with a high incidence of delayed bone healing (union or nonunion) compounded with severe pain and a risk of a secondary fracture. Developing bioengineered functional periosteal substitutes is an indispensable approach to augment bone healing. In this study, we have developed a biomimetic periosteum membrane consisting of electrospun oxygen-releasing antioxidant polyurethane on collagen membrane (polyurethane-ascorbic acid-calcium peroxide containing fibers on collagen (PUAOCC)). Further, to assist bone formation, we have developed a bioactive inorganic-organic composite cryogel (bioglass-collagen-gelatin-nanohydroxyapatite (BCGH)) as a bone substitute. In an in vitro simulated oxidative stress model, PUAOCC supported the primary periosteal cell survival. Moreover, in an in vivo, critical-sized (5.9 mm × 3.2 mm × 1.50 mm) unicortical rat tibial bone defect, implantation of PUAOCC along with the functionalized BCGH led to significant improvement in bone formation along with periosteal regeneration. The periosteal regeneration was confirmed by expression of periosteum-specific periostin and neuronal regulation-related protein markers. Our study demonstrates the development of a periosteum-mimicking membrane with promising applications to facilitate periosteal regeneration, thus assisting bone formation when used in combination with bone composites and mimicking the natural bone repair process.