The defined self-assembly of peptides (SAPs) into nanostructured bioactive hydrogels has great potential for repairing traumatic brain injuries, as they maintain a stable, homeostatic environment at an injury site, preventing further degeneration. They also present a bespoke platform to restore function via the naturalistic presentation of therapeutic proteins, such as stromal-cell-derived factor 1 (SDF-1), expressed by meningeal cells. A key challenge to the use of the SDF protein, however, is its rapid diffusion and degradation. Here, we engineered a homeostatic hydrogel produced by incorporating recombinant SDF-1 protein within a self-assembled peptide hydrogel to create a supportive milieu for transplanted cells. Our hydrogel can concomitantly deliver viable primary neural progenitor cells and sustained active SDF-1 to support the nascent graft, resulting in increased neuronal differentiation. Moreover, this homeostatic hydrogel can ensure a healthy and larger graft core without impeding neuronal fiber growth and innervation. These findings demonstrate the regenerative potential of these hydrogels to improve the integration of grafted cells to treat neural injuries and diseases.