Hydrogel scaffolds are particularly interesting for applications in tissue engineering because of their ability to create a favorable environment which mimics in vivo conditions. However, the hierarchically ordered anisotropic structure which is found in many native tissues and cellular components is hard to achieve in 3D scaffolds. In this work, we report the incorporation of magnetic nanoparticle-decorated reduced graphene oxide (m-rGO) within a collagen hydrogel. This magneto-responsive m-rGO aligned within the collagen hydrogel during gelation with the application of a low external magnetic field. This nanocomposite hydrogel with magnetically aligned m-rGO flakes is capable of encapsulating neuroblastoma cells (SH-SY5Y), promoting cell differentiation and inducing oriented cell growth owing to its excellent biocompatibility and electrical conductivity. The directionally oriented and differentiated SH-SY5Y cells within the m-rGO collagen hydrogel showed propagation of calcium signal along the direction of orientation. This method can be applied to creating magnetically responsive materials with potential for various biomedical applications.