Tissue engineering is a promising approach for the repair of articular cartilage defects, with engineered constructs emerging that match native tissue properties. However, the inflammatory environment of the damaged joint might compromise outcomes, and this may be impacted by the choice of cell source in terms of their ability to operate anabolically in an inflamed environment. Here, we compared the response of engineered cartilage derived from native chondrocytes and mesenchymal stem cells (MSCs) to challenge by TNFα and IL-1β in order to determine if either cell type possessed an inherent advantage. Compositional (extracellular matrix) and functional (mechanical) characteristics, as well as the release of catabolic mediators (matrix metalloproteinases [MMPs], nitric oxide [NO]) were assessed to determine cell- and tissue-level changes following exposure to IL-1β or TNF-α. Results demonstrated that MSC-derived constructs were more sensitive to inflammatory mediators than chondrocyte-derived constructs, exhibiting a greater loss of proteoglycans and functional properties at lower cytokine concentrations. While MSCs and chondrocytes both have the capacity to form functional engineered cartilage in vitro, this study suggests that the presence of an inflammatory environment is more likely to impair the in vivo success of MSC-derived cartilage repair. © 2018 Orthopaedic Research Society. Published by Wiley Periodicals, Inc. J Orthop Res 36:2901-2910, 2018.