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Articular cartilage lacks an intrinsic repair capacity and due to the ability of mesenchymal stem cells (MSCs) to differentiate into chondrocytes, MSCs have been touted as a cellular source to regenerate damaged cartilage. However, a number of prevailing concerns for such a treatment remain. Generally, administration of MSCs into a cartilage defect results in poor regeneration of the damaged cartilage with the repaired cartilage consisting primarily of fibro-cartilage rather than hyaline cartilage. Methods that improve the chondrogenic potential of transplanted MSCs in vivo may be advantageous. In addition, the proclivity of MSC-derived cartilage to undergo hypertrophic differentiation or form bone in vivo also remains a clinical concern. If MSC-derived cartilage was to undergo hypertrophic differentiation in vivo, this would be deleterious in a clinical setting. This study focuses on establishing a mechanism of action by which hypoxia or low oxygen tension can be used to both enhance chondrogenesis and attenuate hypertrophic differentiation of both MSC and ATDC5 derived chondrocytes. Having elucidated a novel mechanism of action, the subsequent goals of this study were to develop an in vitro culture regime to mimic the beneficial effects of physiological low oxygen tension in a normoxic environment.