Adult stem cells gradually lose their stemness when plated in monolayer culture after isolation from their in vivo niche. In this study, we hypothesized that the in vitro microenvironment can be optimized by modulating oxygen tension and mitotic signal in a tissue-specific extracellular matrix (ECM) deposited by synovium-derived stem cells (SDSCs) to rejuvenate expanded SDSC proliferation and chondrogenic potential. Passage 3 SDSCs were plated on either SDSC-derived ECM or plastic flask and incubated in either hypoxia (5% O(2)) or normoxia (21% O(2)) with or without the supplementation of 10 ng/mL of basic fibroblast growth factor-2 (FGF-2) for 7 days, followed by pellet culture in a serum-free chondrogenic medium for 14 days. Our data showed that, compared with the mitotic effect of FGF-2 on SDSCs, ECM expansion greatly enhanced SDSC proliferation while retaining SDSC stem cell characteristics. More importantly, ECM pretreatment yielded SDSC pellets with a comparable chondrogenic index to FGF-2 pretreatment, both of which were much higher than SDSC expansion on plastic flask alone. FGF-2 pretreatment led to the highest glycosaminoglycans and DNA content; intriguingly, it also contributed to the highest expression level of hypertrophic marker genes. Surprisingly, the hypertrophic marker genes could be downregulated if the pretreatment was combined with hypoxia or ECM. The combination of hypoxia, FGF-2, and SDSC-derived ECM contributed to the highest cell number in SDSC expansion. Our study indicates that the three-dimensional microenvironment for ex vivo expansion can be optimized to provide high-quality stem cells for stem cell-based cartilage defect repair.