Cartilage repair in osteoarthritic patients remains a challenge. Identifying resident or donor stem/progenitor cell populations is crucial for augmenting the low intrinsic repair potential of hyaline cartilage. Furthermore, mediating the interaction between these cells and the local immunogenic environment is thought to be critical for long term repair and regeneration. In this study we propose articular cartilage progenitor/stem cells (CPSC) as a valid alternative to bone marrow-derived mesenchymal stem cells (BMMSC) for cartilage repair strategies after trauma. Similar to BMMSC, CPSC isolated from osteoarthritic patients express stem cell markers and have chondrogenic, osteogenic, and adipogenic differentiation ability. In an in vitro 2D setting, CPSC show higher expression of SPP1 and LEP, markers of osteogenic and adipogenic differentiation, respectively. CPSC also display a higher commitment toward chondrogenesis as demonstrated by a higher expression of ACAN. BMMSC and CPSC were cultured in vitro using a previously established collagen-chondroitin sulfate 3D scaffold. The scaffold mimics the cartilage niche, allowing both cell populations to maintain their stem cell features and improve their immunosuppressive potential, demonstrated by the inhibition of activated PBMC proliferation in a co-culture setting. As a result, this study suggests articular cartilage derived-CPSC can be used as a novel tool for cellular and acellular regenerative medicine approaches for osteoarthritis (OA). In addition, the benefit of utilizing a biomimetic acellular scaffold as an advanced 3D culture system to more accurately mimic the physiological environment is demonstrated.