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We developed biodegradable polymeric coatings loaded with increasing amounts of dexamethasone on composites based on polylactic acid and Mg particles for bone repair. Incorporation of Mg particles into the polymeric matrix improves the compressive behaviour of the polymer. Mg-containing composites release Mg2+ ions into the culture medium and improve mesenchymal stem cell (MSC) viability, enhance their osteogenic potential and promote the release of angiogenic factors. Dexamethasone-loaded coatings deposited on composites delay Mg2+ ion dissolution while releasing controlled amounts of the drug, which are highly dependent on initial payload. Release kinetic of dexamethasone from the coatings exhibits a fast initial release of the drug followed by a slower secondary release. Bioactivity of the released dexamethasone was explored by monitoring dose-dependent responses of MSCs and macrophages. Biological effects exerted by the released drug are similar to those observed in cells treated with solutions of the glucocorticoid, indicating that the method employed for inclusion of dexamethasone into the coatings does not impair its bioactive behaviour. Culturing MSCs on dexamethasone-releasing coatings enhances extracellular matrix production and initial induction to osteogenic commitment as a function of drug payload. Dexamethasone incorporated into the coatings presents anti-inflammatory activity, as shown by the decrease in the production of cytokines and angiogenic factors by macrophages and MSCs. Deposition of dexamethasone-releasing coatings on polymer/Mg composites appears to be a promising approach to delay composite degradation at the early stage of implantation and may be useful to attenuate inflammation and adverse foreign body reactions.