Aim: To examine the chondrogenic potential of human adipose derived stem cells (hASC) induced by human transforming growth factor beta2 (hTGF beta2) in vitro, and to investigate if predifferentiated hASC can produce neocartilage in vivo. Methods: hASC were isolated from subcutaneous adipose tissue and cul-tured in pellets with the addition of hTGF beta2. Chondrogenic differentiation was assayed by RT-PCR, Weste blotting, toluidine blue staining, and immuno-histochemistry staining for collagen type Ⅱ. For the in vivo study, intact induced cell pellets or the released cells embedded in alginate gel with different concentra-tions were implanted subcutaneously in nude mice. Specimens were harvested at different time points and carried with histological and immunohistochemistry ex-amination to evaluate the cartilage formation. Results: RT-PCR analysis revealed that hASC produced aggrecan and collagen type Ⅱ after 7 d of induction and continued throughout the culture period. This was also demonstrated by the Weste blot analysis, positive staining of toluidine blue, and immunohistochem-istry for collagen type Ⅱ. After reseeding in the monolayer, the cells isolated from the pellets displayed a polygonal morphology compared with the primary spindle shape, hASC were released from the induced cell pellets when embedded in alginate gel (implanted cell concentration=5x106/mL or higher). They produced neocartilage after 12 weeks in vivo culture; however, intact induced cell pellets implanted subcutaneously rapidly lost their differentiated phenotype. Conclusion:Chondrogenesis of hASC in vitro can be induced by combining pellet culture and hTGF beta2 treatment. Predifferentiated hASC embedded in alginate gel have the ability of producing neocartilage in vivo.