The present study aimed to develop a thiolated sodium alginate-based nanohybrid formulation reinforced with hydroxyapatite to improve bone architecture in bone degenerative disorders. The prepared thiolated sodium alginate was converted into a nanocomposite by combining it with polyethylene glycol and hydroxyapatite. The nanocomposite was characterized by scanning electron microscopy, atomic force microscopy, and dynamic light scattering. The developed nanocomposite was evaluated for cell toxicity by performing an MTT assay using the MG63 cell line. The bone targeting efficacy was investigated by analysis of trabecular architecture on ovariectomized rat model and the molecular mechanism was investigated by molecular docking studies. The results of particle size determination indicated that the nanocomposite was within the size range of 100–200 nm. FTIR and XRD studies confirmed the thiolation of sodium alginate and the development of a composite material. Cell line studies showed that the developed nanocomposite was not cytotoxic and well tolerated by the MG63 cell line. The scanning electron microscopy and histological studies of trabecular bone in substantiation with molecular docking study results confirmed the bone targeting and healing ability of the nanocomposite. The results of the study indicated that the developed nanocomposite can be a potential biomaterial for bone tissue regeneration.