Cytotoxic T-lymphocyte-associated protein 4 (CTLA4) can promote osteogenic differentiation of human bone marrow mesenchymal stem cells (hBMMSCs), and CTLA4-modified bone marrow mesenchymal stem cells possess immunoregulatory effects. In the present study, we aimed to construct a new tissue engineering bone using demineralized bone matrix and CTLA4 protein, designated as DBM-CTLA4 (+). The effects of DBM-CTLA4 (+) on the osteogenic differentiation of hBMMSCs and T lymphocyte activation were evaluated through in vitro experiments. The cumulative release of CTLA4 from DBM-CTLA4 (+) was determined using enzyme-linked immunosorbent assay. DBM-CTLA4 (+) was co-cultured in a Transwell chamber with either phytohemagglutinin-treated hBMMSCs or human peripheral blood mononuclear cells (hPBMCs). Osteogenic differentiation of hBMMSCs was assessed by calcium deposition, ALP activity, and the protein levels of COL1A1, RUNX2, BMP2, and OPN. T lymphocyte activity was assessed by measuring the protein levels of IL-2, L-17, HLA-DRA1, IFN-γ, and RANKL. Our results showed that the cumulative release rates of CTLA4 at 7, 14, 21, and 28 days were 12.6% ± 1.4%, 30.2% ± 2.3%, 49.8% ± 3.8%, and 60.5% ± 2.7%, respectively. Compared to the negative control, DBM-CTLA4 (+) promoted the proliferation of hBMMSCs, and enhanced calcium deposition, ALP activity, and protein levels of COL1A1, RUNX2, BMP2, and OPN. Moreover, DBM-CTLA4 (+) decreased the levels of IL-2, IL-17, HLA-DR, IFN-γ, and RANKL in hPBMCs treated with phytohemagglutinin. In conclusion, DBM-CTLA4 (+) promoted proliferation and osteogenic differentiation of hBMMSCs and suppressed T lymphocyte activation.