To date, most interfacial tissue engineering approaches have used stratified designs, in which there are two or more discrete layers comprising the interface. Continuously graded interfacial designs, where there is no discrete transition from one tissue type to another, are gaining attention as an alternative to stratified designs. Given that osteochondral regeneration holds the potential to enhance cartilage regeneration by leveraging the healing capacity of the underlying bone, we endeavored to introduce a continuously-graded approach to osteochondral regeneration. The purpose of this study was thus to evaluate the performance of a novel gradient-based scaffolding approach to regenerate osteochondral defects in the New Zealand White rabbit femoral condyle. Bioactive plugs were constructed from poly(D,L-lactic-co-glycolic acid) microspheres with a continuous gradient transition between cartilage-promoting and bone-promoting growth factors. At 6 and 12 weeks of healing, results suggested that the implants provided support for the neo-synthesized tissue, and the gradient in bioactive signaling may have been beneficial for bone and cartilage regeneration compared to the blank control implant, as evidenced by histology. In addition, the effects of preseeding gradient scaffolds with umbilical cord mesenchymal stromal cells (UCMSCs) from the Wharton's jelly of New Zealand White rabbits were evaluated. Results indicated that there may be regenerative benefits to prelocalizing UCMSCs within scaffold interiors. The inclusion of bioactive factors in a gradient-based scaffolding design is a promising new treatment strategy for defect repair in the femoral condyle.