Cartilage is an avascular tissue incapable of regeneration. Current treatment modalities for joint cartilage injuries are inefficient in regenerating hyaline cartilage and often leads to the formation of fibrocartilage with undesirable mechanical properties. There is an increasing interest in investigating alternative treatments such as tissue engineering, which combines stem cells with scaffolds to produce cartilage in vitro for subsequent transplant. Previous studies have shown that chondrogenesis of induced stem cells is influenced by various growth factors, oxygen tensions and mechanical stimulation. This study demonstrated the chondrogenic potential of human cord blood-derived Multi-Lineage Progenitor Cells (MLPCs) under normoxic and hypoxic culture conditions. Second, MLPCs were seeded in a novel, structurally graded polycaprolactone (SGS-PCL) scaffold and chondrogenesis was evaluated. MLPCs obtained from BioE Inc (St. Paul, MN, USA) were expanded, and subsequently cultured in a standard micromass pellet system. Pellets were cultured for 21 days in control or chondrogenic induction medium under 5% or 21% oxygen tension. Chondrogenic potential was evaluated by histology (alcian blue, safranin O), glycosaminoglycan (GAG) protein secretion, and gene expression of cartilage markers. Based on this data, MLPCs were seeded in SGS-PCL scaffolds and cultured under optimal oxygen tension for 21 days followed by chondrogenic evaluation as above. Porous SGS-PCL scaffolds were provided by iNano (Aarhus University, Denmark). Micromass pellets cultured in induction medium were larger with a more dense and well-defined spherical structure. GAG production in induced pellets was shown by alcian blue and safranin O staining with most GAG observed centrally in 21%-, and peripherally in 5%-oxygen tensions. Histological sections revealed a cartilaginous struc¬ture as recognized by chondrocyte-like cells embedded in lacunae. Histological sections of control pellets did not stain for GAG nor show a cartilage-like morphology. Gene expression analyses (qRT-PCR), GAG protein secretion, and histology for cells cultured on scaffolds are in progress. Based on the preliminary results, MLPCs possess better chondrogenic potential when cultured in induction medium in a micromass pellet system under hypoxic condition. Results from MLPCs seeded in SGS-PCL scaffolds are currently being obtained. Whether this novel SGS-PCL scaffold supports the chondrogenic differentiation of MLPCs will be interesting to evaluate since this scaffold possesses mechanical properties absent from other “soft” scaffolds currently being investigated for cartilage regeneration and implantation.