There are increasing reports that mesenchymal stem cells (MSCs) are present in various tissues other than bone marrow, including synovium. Here we investigated the optimal conditions for in vitro chondrogenesis of human synovium-derived MSCs and compared these cells with bone marrow-derived MSCs, especially in terms of their chondrogenesis potential. Synovium and bone marrow were harvested from six donors during knee operations for ligament injuries. Digested synovium cells or nucleated cells from bone marrow were expanded clonally. A pellet culture system was used for chondrogenesis, and the best combination of up to three cytokines of the seven assessed. Synovium-derived MSCs plated at a lower density expanded more rapidly. Contrary to previous reports, a combination of TGFβ and dexamethasone was not sufficient to induce chondrogenesis. However, addition of BMP2 to TGFβ and dexamethasone dramatically increased cartilage pellet size and the synthesis of cartilage matrix. The cartilage pellets were also analyzed by electron microscopy and immunohistology. DNA content per pellet decreased during chondrogenesis, indicating the pellet increased its size through the accumulation of newly synthesized extracellular matrix. Sequential chondrogenic gene expression was demonstrated by RT-PCR. Synovium-derived MSCs looked similar to the bone marrow-derived MSCs in their surface epitopes and proliferation potential; however, cartilage pellets from synovium were significantly larger than those from bone marrow in patient-matched comparisons. We demonstrated that the combination of TGFβ, dexamethasone, and BMP2 was optimal for in vitro chondrogenesis of synovium-derived MSCs and that the synovium-derived MSCs have a greater chondrogenesis potential than bone marrow-derived MSCs. © 2005 Wiley-Liss, Inc.