Injectable hydrogels have great potential for use in regenerative medicine as cellular delivery vectors. However, as with other cell-laden transplantable materials, they suffer from issues relating to hypoxia, including poor cell survival, differentiation, and functional integration owing to the lack of an established vascular network. Here, we have engineered a hybrid myoglobin:peptide hydrogel that can concomitantly deliver stem cells and oxygen to the brain to support engraftment until vascularisation can occur naturally. This hybrid hydrogel can modulate cell fate specification within progenitor cell grafts, resulting in a significant increase in neuronal differentiation. The addition of myoglobin to the hydrogel resulted in more extensive innervation within the host tissue from the grafted cells, which is essential for neuronal replacement strategies to ensure functional synaptic connectivity. Further development of this approach could result in greater functional integration of stem cell-derived grafts for the treatment of neural injuries and diseases affecting the central and peripheral nervous systems.