Poly 4-mercaptophenyl methacrylate-carbon nano-onions ((PMPMA-CNOs = f-CNOs) were reinforced with polycaprolactone (PCL) to produce PCL/f-CNO nanocomposites using probe sonication. The physicochemical properties of nanocomposites were systematically studied to analyze cell viability and proliferation. In vitro cytotoxicity of PCL/f-CNO nanocomposites was measured with osteoblast cells, and improved cell viability was observed. The cytotoxicity of f-CNOs to osteoblasts was dose-dependent, and PCL/f-CNO (0.5 wt%) nanocomposites showed more than 90% of viability as compared to pristine PCL. Similarly, PCL/f-CNO (0.5 wt%) nanocomposites showed substantial enhancement in mechanical properties. The yield strength, tensile strength, Young modulus, elastic modulus, and fracture toughness were also upgraded at high content of f-CNOs (0.5 wt%). The concentration of f-CNOs considerably influenced the strengthening of PCL/f-CNO nanocomposites, which shows its degree of colloidal dispersion stability and extent of polymer wrapping within the PCL matrix. Nevertheless, these nontoxic PCL/f-CNO nanocomposites can be used as promising biomaterials for orthopedic applications.