The loss of expression of chondrogenic markers during monolayer expansion remains a stumbling block for cell-based treatment of cartilage lesions. Here, we introduce sulfated alginate hydrogels as a cartilage biomimetic biomaterial that induces cell proliferation while maintaining the chondrogenic phenotype of encapsulated chondrocytes. Hydroxyl groups of alginate were converted to sulfates by incubation with sulfur trioxide-pyridine complex (SO3/pyridine), yielding a sulfated material cross-linkable with calcium chloride. Passage 3 bovine chondrocytes were encapsulated in alginate and alginate sulfate hydrogels for up to 35 days. Cell proliferation was five-fold higher in alginate sulfate compared with alginate (p=0.038). Blocking beta1 integrins in chondrocytes within alginate sulfate hydrogels significantly inhibited proliferation (p=0.002). Sulfated alginate increased the RhoA activity of chondrocytes compared with unmodified alginate, an increase that was blocked by β1 blocking antibodies (p=0.017). Expression and synthesis of type II collagen, type I collagen, and proteoglycan was not significantly affected by the encapsulation material evidenced by quantitative reverse transcription polymerase chain reaction (qRT-PCR) and immunohistochemistry. Alginate sulfate constructs showed an opaque appearance in culture, whereas the unmodified alginate samples remained translucent. In conclusion, alginate sulfate provides a three dimensional microenvironment that promotes both chondrocyte proliferation and maintenance of the chondrogenic phenotype and represents an important advance for chondrocyte-based cartilage repair therapies providing a material in which cell expansion can be done in situ.