A common strategy for promoting bone allograft healing is the design of tissue-engineered periosteum (TEP) to orchestrate host-tissue infiltration. However, evaluating requires costly and time-consuming in vivo studies. Therefore, in vitro assays are necessary to expedite TEP designs. Since angiogenesis is a critical process orchestrated by the periosteum, this study investigates in vitro 3D cell spheroid vascularization as a predictive tool for TEP-mediated in vivo healing. Spheroids of human umbilical vein endothelial cells (HUVECs) and human mesenchymal stem cells (hMSCs) are encapsulated in enzymatically-degradable poly (ethylene glycol)-based hydrogels and sprout formation, network formation, and angiogenic growth factor secretion are quantified. Hydrogels are also evaluated as TEP-modified allografts for in vivo bone healing with graft vascularization, callus formation, and biomechanical strength quantified as healing metrics. Evaluation of hydrogels highlights the importance of degradation, with 24-fold greater day 1 sprouts observed in degradable hydrogels in vitro and 4-fold greater graft-localized vascular volume at 6-weeks in vivo compared to non-degradable hydrogels. Correlations between in vitro and in vivo studies elucidate linear relationships when comparing in vitro sprout formation and angiocrine production with 3- and 6-week in vivo graft vascularization, 3-week cartilage callus, and 6-week bone callus, with a Pearson's R(2) value equal to 0.97 for the linear correlation between in vitro sprout formation and 6-week in vivo vascular volume. Non-linear relationships are found between in vitro measures and bone torque strength at week 6. These correlations suggest that the in vitro sprouting assay has predictive power for in vivo vascularization and bone allograft healing.