In a small bowl, combine the warm water and active dry yeast. Stir gently and let sit for 5 to 10 minutes until foamy.
In a large mixing bowl, whisk together the all-purpose flour, granulated sugar, and salt.
In a separate bowl, whisk the warm milk, melted butter, and egg until well combined.
Pour the yeast mixture and the milk mixture into the dry ingredients. Stir with a wooden spoon or dough hook attachment until a rough dough forms.
Turn the dough onto a lightly floured surface and knead for about 8 minutes until smooth and elastic. Alternatively, knead with a stand mixer fitted with a dough hook on medium speed for 6 minutes.
Flatten the dough slightly and sprinkle the raisins and chopped walnuts evenly over the surface. Fold the dough over the inclusions and knead gently for 2 to 3 minutes until the raisins and walnuts are evenly distributed throughout the dough.
Place the dough in a lightly greased bowl, cover it with a clean kitchen towel or plastic wrap, and let it rise in a warm, draft-free area for 1 to 1 1/2 hours, or until doubled in size.
Punch down the dough to release the air. Shape it into a loaf and place it in a greased 9×5-inch (23×13 cm) loaf pan.
Cover the loaf pan loosely and let the dough rise again for 30 to 45 minutes until it rises about 1 inch above the rim of the pan.
Preheat the oven to 350°F (175°C).
Bake the bread for 30 to 35 minutes, or until the top is golden brown and the bread sounds hollow when tapped.
Remove the bread from the oven and let it cool in the pan for 10 minutes.
Transfer the bread to a wire rack to cool completely before slicing.