To address the need to biodegradable, electroactive conduits accelerating nerve regeneration, here we develop a nanocomposite hydrogel made of alginate reinforced by citric acid functionalized graphite nanofilaments. The green, simple functionalization enhances the nanofillers distribution and their biocompatibility, as verified using mesenchymal stem cells in vitro. The uniformly distributed nanofilaments raise mechanical stability of the nanocomposite hydrogel versus the neat one up to three times. Also, the nanofilaments enable electrical contact and intercellular signaling thereby stimulating their biological activity. In vitro studies proved the biocompatibility of the nanocomposite hydrogel whereon PC12 cells proliferate and spread evidently. In vivo tests also supported applicability of the nanocomposite hydrogel for implantation within body, and the samples showed no adverse reaction and no inflammatory responses after 14 days. Conclusively, the results certify that the developed electroactive nanocomposite hydrogel is able to stimulate nerve generation and could be confidently used as a nerve conduit material.