This study evaluated the extent of differentiation and cartilage biosynthetic capacity of human adult adipose-derived stem cells relative to human fetal chondrocytes. Both types of cell were seeded into nonwoven-mesh polyglycolic acid (PGA) scaffolds and cultured under dynamic conditions with and without addition of TGF-β1 and insulin. Gene expression for aggrecan and collagen type II was upregulated in the stem cells in the presence of growth factors, and key components of articular cartilage such as glycosaminoglycan (GAG) and collagen type II were synthesized in cultured tissue constructs. However, on a per cell basis and in the presence of growth factors, accumulation of GAG and collagen type II were, respectively, 3.4- and 6.1-fold lower in the stem cell cultures than in the chondrocyte cultures. Although the stem cells synthesized significantly higher levels of total collagen than the chondrocytes, only about 2.4% of this collagen was collagen type II. Relative to cultures without added growth factors, treatment of the stem cells with TGF-β1 and insulin resulted in a 59% increase in GAG synthesis, but there was no significant change in collagen production even though collagen type II gene expression was upregulated 530-fold. In contrast, in the chondrocyte cultures, synthesis of collagen type II and levels of collagen type II as a percentage of total collagen more than doubled after growth factors were applied. Although considerable progress has been achieved to develop differentiation strategies and scaffold-based culture techniques for adult mesenchymal stem cells, the extent of differentiation of human adipose-derived stem cells in this study and their capacity for cartilage synthesis fell considerably short of those of fetal chondrocytes. Biotechnol. Bioeng. 2010;107: 393–401. © 2010 Wiley Periodicals, Inc.