The chondrogenic differentiation of bone marrow-derived human mesenchymal stem cells (MSCs) in a collagen type I hydrogel, which is in clinical use for matrix-based autologous chondrocyte transplantation (ACT), was investigated. Collagen hydrogels with 2.5 x 10(5) MSCs/mL were fabricated and cultured for 3 weeks in a serum-free, defined, chondrogenic differentiation medium containing 10 ng/mL TGF-beta1 or 100 ng/mL BMP-2. Histochemistry revealed morphologically distinct, chondrocyte-like cells, surrounded by a sulfated proteoglycan-rich extracellular matrix in the TGF-beta1 and BMP-2 treated group, with more elongated cells seen in the BMP-2 treated group. Immunohistochemistry detected collagen type II (Col II) in the TGF-beta1 and BMP-2 treated group. Collagen type X (Col X) staining was positive in the TGF-beta1 but only very weak in the BMP-2 treated group. RT-PCR analyses revealed a specific chondrogenic differentiation with the expression of the cartilage specific marker genes Col II, Col X, and aggrecan (AGN) in the TGF-beta1 and the BMP-2 treated group, with earlier expression of these marker genes in the TGF-beta1 treated group. Interestingly, MSC-gels cultured in DMEM with 10% FBS (control) indicated few isolated chondrocyte-like cells but no expression of Col II or Col X could be detected. The results show, that MSCs cultured in a collagen type I hydrogel are able to undergo a distinct chondrogenic differentiation pathway, similar to that described for MSCs cultured in high-density pellet cultures. These findings are valuable in terms of ex vivo predifferentiation or in situ differentiation of MSCs in collagen hydrogels for articular cartilage repair.