Cell number is often a limiting factor in studies of chondrocyte physiology, particularly for human investigations. Chondrocytes can be readily proliferated in monolayer culture, however, differentiated phenotype is soon lost. We therefore endeavored to restore normal phenotype to human chondrocytes after serial passage in monolayer culture by manipulating cell morphology and oxygen tension towards the in vivo state. Third passage cells were encapsulated in alginate and exposed to either 20% or more physiologic 5% oxygen tensions. To assess cell phenotype, gene expression was measured using TaqMan real-time PCR. Encapsulated, primary chondrocytes cultured in 20% oxygen were used as a positive reference. Passaged human chondrocytes were fibroblastic in appearance and had lost normal phenotype as evidenced by a decrease in expression of collagen II, aggrecan, and sox9 genes of 66, 6, and 14 fold, respectively; with concomitant high expression of type I collagen (22 fold increase). A partial regaining of the differentiated phenotype was observed by encapsulation in 20% oxygen; however, even after 4 weeks, collagen II gene expression was not fully restored. Collagen II and aggrecan expression were increased, on average, 3 fold, in 5% oxygen tension compared to 20% cultures. Furthermore, matrix glycosaminoglycan (GAG) levels were significantly increased in reduced oxygen. In fact, after 4 weeks in 5% oxygen, encapsulated third passage cells had collagen II expression fully regained and aggrecan and sox9 levels actually exceeding primary cell levels in 20% oxygen. Our results show that the phenotype of serially passaged human articular chondrocytes is more fully restored by combining encapsulation with culture in more physiological levels of oxygen. Sox9, an essential transcription factor for chondrocyte differentiation is strongly implicated in this process since its expression was upregulated almost 27 fold. These findings have implications for the optimal conditions for the in vitro culture of chondrocytes. © 2004 Wiley-Liss, Inc.