Vascularization is a key challenge in tissue engineering. Three-dimensional structure and microcirculation are two fundamental parameters for evaluating vascularization. Microscopic techniques with cellular level resolution, fast continuous observation, and robust 3D postimage processing are essential for evaluation, but have not been applied previously because of technical difficulties. In this study, we report novel video-rate confocal microscopy and 3D postimage processing techniques to accomplish this goal. In an immune-deficient mouse model, vascularized bone tissue was successfully engineered using human bone marrow mesenchymal stem cells (hMSCs) and human umbilical vein endothelial cells (HUVECs) in a poly (D,L-lactide-co-glycolide) (PLGA) scaffold. Video-rate (30 FPS) intravital confocal microscopy was applied in vitro and in vivo to visualize the vascular structure in the engineered bone and the microcirculation of the blood cells. Postimage processing was applied to perform 3D image reconstruction, by analyzing microvascular networks and calculating blood cell viscosity. The 3D volume reconstructed images show that the hMSCs served as pericytes stabilizing the microvascular network formed by HUVECs. Using orthogonal imaging reconstruction and transparency adjustment, both the vessel structure and blood cells within the vessel lumen were visualized. Network length, network intersections, and intersection densities were successfully computed using our custom-developed software. Viscosity analysis of the blood cells provided functional evaluation of the microcirculation. These results show that by 8 weeks, the blood vessels in peripheral areas function quite similarly to the host vessels. However, the viscosity drops about fourfold where it is only 0.8 mm away from the host. In summary, we developed novel techniques combining intravital microscopy and 3D image processing to analyze the vascularization in engineered bone. These techniques have broad applicability for evaluating vascularization in other engineered tissues as well.