Abstract: Periodontal disease is the main reason for tooth loss in adults. Tissue engineering and regenerative medicine are the advanced technologies used to manage soft and hard tissue defects caused by periodontal disease. We developed a transforming growth factor-β3 chitosan sponge (TGF-β3/CS) to repair periodontal soft and hard tissue defects. We investigated the proliferation and osteogenic differentiation behaviors of primary human periodontal ligament stem cells (hPDLSCs) to discuss the bioactivity and application of TGF-β3 in periodontal disease. We separately used Calcein-AM/PI double-labeling or CM-Dil-labeling coupled with fluorescence microscopy to trace the survival and function of the cells after implantation in vitro or in vivo. The mineralization of osteogenic differentiated hPDLSCs was confirmed by measuring ALP activity and calcium content. The levels of COL I, ALPL, TGF-βRI, TGF-βRII, and Pp38/t-p38 were tested using Western blot to explore the mechanism of bone repair prompted by TGF-β3. When hPDLSCs were inoculated with different concentrations of TGF-β3/CS (62.5–500 ng/mL), ALP activity was the highest in TGF-β3 (250 ng/mL) group after seven days (P < 0.05 vs. control); the calcium content in each group increased significantly after 21 and 28 days (P < 0.001 vs. control). The best result was achieved in the TGF-β3 (500 ng/mL) group. All results showed that TGF-β3/CS can promote osteogenic differentiation of hPDLSC and may be involved in the p38 MAPK signaling pathway. TGF-β3/CS has the potential for application in the repair of incomplete alveolar bone defects.