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Chitosan scaffolds have been shown to possess biological and mechanical properties suitable for tissue engineering and clinical applications. In the present work, chitosan sponges were evaluated regarding their ability to support cartilage cell proliferation and maturation, which are the first steps in endochondral bone formation. Chitosan sponges were seeded with chondrocytes isolated from chicken embryo sterna. Chondrocyte/chitosan constructs were cultured for 20 days, and treated with retinoic acid (RA) to induce chondrocyte maturation and matrix synthesis. At different time points, samples were collected for microscopic, histological, biochemical, and mechanical analyses. Results show chondrocyte attachment, proliferation, and abundant matrix synthesis, completely obliterating the pores of the sponges. RA treatment caused chondrocyte hypertrophy, characterized by the presence of type X collagen in the extracellular matrix and increased alkaline phosphatase activity. In addition, hypertrophy markedly changed the mechanical properties of the chondrocyte/chitosan constructs. In conclusion, we have developed chitosan sponges with adequate pore structure and mechanical properties to serve as a support for hypertrophic chondrocytes. In parallel studies, we have evaluated the ability of this mature cartilage scaffold to induce endochondral ossification.