In this study, chondrocytes were encapsulated into an injectable, in situ forming type II collagen/hyaluronic acid (HA) hydrogel cross-linked with poly(ethylene glycol) ether tetrasuccinimidyl glutarate (4SPEG) and supplemented with the transforming growth factor β1 (TGFβ1). The chondrocyte-hydrogel constructs were cultured in vitro for 7 days and studied for cell viability and proliferation, morphology, glycosaminoglycan production, and gene expression. Type II collagen/HA/4SPEG formed a strong and stable hydrogel, and the chondrocytes remained viable during the encapsulation process and for the 7-day culture period. In addition, the encapsulated cells showed spherical morphology characteristic for chondrocytic phenotype. The cells were able to produce glycosaminoglycans into their extracellular matrix, and the gene expression of type II collagen and aggrecan, genes specific for differentiated chondrocytes, increased over time. The results indicate that the studied composite hydrogel with incorporated chondrogenic growth factor TGFβ1 is able to maintain chondrocyte viability and characteristics, and thus, it can be regarded as potential injectable cell delivery vehicle for cartilage tissue engineering.