Electrospun polycaprolactone nanofiber matrices surface functionalized with poly[(ethyl alanato)(1)(p-methyl phenoxy)(1)] phosphazene were fabricated for the purpose of soft skeletal tissue regeneration. This preliminary study reports the effect of fiber diameter and polyphosphazene surface functionalization on significant scaffold properties such as morphology, surface hydrophilicity, porosity, tensile properties, human mesenchymal stem cell adhesion and proliferation. Six fiber matrices comprised of average fiber diameters in the range of 400-500, 900-1000, 1400-1500, 1900-2000, 2900-3000 and 3900-4000 nm were considered for primary evaluation. After achieving the greatest proliferation while maintaining moderate tensile modulus, matrices in the diameter range of 2900-3000 nm were selected to examine the effect of coating with 1%, 2% and 3% (weight/volume) polyphosphazene solutions. Polyphosphazene functionalization resulted in rougher surfaces that correlated with coating solution concentration. Analytical techniques such as energy dispersive X-ray analysis, Fourier transform infrared spectroscopy, elemental analysis, differential scanning calorimetry, water contact angle goniometry and confocal microscopy confirmed the presence of polyphosphazene and its distribution on the functionalized fiber matrices. Functionalization achieved through 2% polymer solutions did not affect average pore diameter, tensile modulus, suture retention strength or cell proliferation compared to PCL controls. Surface polyphosphazene functionalization significantly improved the matrix hydrophilicity evidenced through decreased water contact angle of PCL matrices from 130 degrees to 97 degrees. Further, enhanced total protein synthesis by cells during in vitro culture was seen on 2% PPHOS functionalized matrices over controls. Improving PCL matrix hydrophilicity via proposed surface functionalization may be an efficient method to improve cell-PCL matrix interactions.