Although growth factors (GFs) are key molecules for regenerative medicine, their use has been limited by issues associated with suboptimal delivery systems and incomplete understanding of their signaling dynamics. Here, we explored how proinflammatory signals affect GF regenerative potential. Using bone regeneration in mouse, we found that the regenerative capacity of two clinically relevant GFs (BMP-2 and PDGF-BB) is impaired by interleukin-1 receptor (IL-1R1). Mechanistically, IL-1R1 activation in bone-forming cells desensitizes them to GFs and accelerates senescence. Moreover, administration of the GFs triggers IL-1 release by macrophages. To provide localized and sustained IL-1R1 inhibition, we engineered IL-1R antagonist (IL-1Ra) to bind the extracellular matrix (ECM) very strongly and demonstrate that codelivering GFs with ECM-binding IL-1Ra induces superior regeneration. Thus, we highlight that GF regenerative activity is hindered by proinflammatory signals, and GF-based therapies should integrate immunomodulation. Particularly, ECM-binding IL-1Ra holds clinical translational potential by enhancing efficacy of GF therapies.