A release-controlled OP-1 delivery system consisting of a suspension of core-shell nanoparticles was prepared. The nanoparticles were composed of a core of positively-charged large unilamellar liposomes and a shell constructed through the L-b-L assembly of alternating layers of negatively-charged sodium alginate and positively-charged chitosan. Cytotoxicity was assayed with MC3T3-E1.4 mouse preosteoblast cells and cell viability was determined by colorimetry (CellQuanti-MTT™ kit). The system was loaded with a range of OP-1 concentrations and the release profiles were obtained and fitted into the Higuchi model to determine release kinetics. Alkaline phosphatase (ALP) activity of preosteoblasts was evaluated using a micro-BCA assay. The resulting monodisperse and nontoxic spherical nanoparticles exhibited high physical stability in simulated physiological media as well as an extended shelf-life allowing for immediate protein loading before future administration. ALP activity increased over time with the OP-1 loaded delivery system when compared with control, protein alone, and nanoparticles alone (p < 0.05). The system offers copious compartments for protein entrapment including the aqueous core and within the polyelectrolyte layers in the shell and demonstrates a sustained triphasic linear release of OP-1 over a prolonged period of 45 days, in vitro. This system offers a great advantage for optimum growth factor performance when applied in different anatomical sites of varying defect sizes and vascularity.