Cartilage repair remains challenging due to limited self-healing, poor biocompatibility, and insufficient mechanical properties of current materials. To overcome these issues, we developed a multifunctional composite hydrogel by integrating gelatine methacrylate (GelMA) with magnesium-doped bioactive glass (Mg-BG) and icariin (ICA). SEM analysis revealed that pure GelMA exhibited a highly porous yet loosely organized structure, whereas the addition of Mg-BG and ICA produced a denser, more interconnected porous network that enhances cell adhesion and nutrient diffusion. In vitro, the ICA/Mg-BG/GelMA hydrogel achieved a swelling ratio up to 430% and maintained cell viability above 80% over 5 days. Moreover, qRT-PCR and immunohistochemical analyses demonstrated that the composite hydrogel upregulated chondrogenic markers (SOX9, ACAN, and COL2A1) compared with GelMA alone. Specifically, it downregulates M1 pro-inflammatory markers (CCR7, iNOS, CD86) and upregulates M2 anti-inflammatory markers (ARG1, CD163, CD206), thereby creating a regenerative microenvironment. These results indicate that the synergistic combination of GelMA, Mg-BG, and ICA not only improves the scaffold's mechanical support but also enhances its biological functionality, offering a promising strategy for cartilage repair. Future studies will focus on in vivo validation to further assess its clinical potential.