The goal of this research was to develop an approach to growth factor delivery that would allow the stable incorporation of growth factors within a cell in‐growth matrix in a manner such that local enzymatic activity associated with tissue regeneration could trigger growth factor release. We investigated this approach in the context of peripheral nerve regeneration by designing modified beta‐nerve growth factor (β‐NGF) fusion proteins and testing their ability to promote neurite extension. Fibrin was selected as the cell in‐growth matrix, and the transglutaminase activity of factor XIIIa was utilized to covalently incorporate β‐NGF fusion proteins within fibrin matrices. Novel β‐NGF fusion proteins, which contained an exogenous factor XIIIa substrate to allow incorporation into fibrin matrices, were expressed recombinantly. An intervening plasmin substrate domain was placed between the factor XIIIa substrate and the NGF domain to allow cell‐mediated growth factor release in response to plasmin, which is generated by invading cells. Immobilized NGF fusion protein with an intervening functional plasmin cleavage sequence enhanced neurite extension from embryonic chick dorsal root ganglia by 50% relative to soluble native β‐NGF and by 350% relative to the absence of NGF. These results suggest that this novel approach to growth factor delivery, in which the factor is delivered upon cellular demand, could enhance nerve regeneration and may be useful in tissue engineering.