A strategy has been designed to develop hyaluronic acid (HA) hydrogel for in vivo bone augmentation using minimal invasive technique. A mild synthetic procedure was developed to prepare aldehyde modified HA by incorporating an amino-glycerol side chain via amidation reaction and selective oxidation of the pendent group. This modification, upon mixing with hydrazide modified HA formed hydrazone-crosslinked hydrogel within 30s that was stable at physiological pH. In vitro experiments showed no cytotoxicity of hydrogel with the controlled release of active bone morphogenic protein-2 (BMP-2). In vivo evaluation of this gel as a BMP-2 carrier was performed by injecting gels over the rat calvarium and showed bone formation in 8 weeks in correlation with the amount of BMP-2 loaded (0, 1 and 30μg) within the gel. Furthermore, hydrogels with 30μg of BMP-2 induced less bone formation upon subcutaneous injection in comparison with subperiosteal implantation. Histological examination showed newly formed bone with a high expression of osteocalcin, osteopontin and with angiogenic bone marrow when higher BMP-2 concentration was employed. Our result suggests that novel HA hydrogels could be used as a BMP-2 carrier and can promote bone augmentation for potential orthopedic applications.