Tissue engineering is a promising therapeutic approach that uses combinations of implanted cells, biomaterial scaffolds, and biologically active molecules to repair or regenerate damaged or diseased tissues. Many diverse and increasingly complex approaches are being developed to repair articular cartilage, with the underlying premise that cells introduced exogenously play a necessary role in the success of engineered tissue replacements. A major consideration that remains in this field is the identification and characterization of appropriate sources of cells for tissue-engineered repair of cartilage. In particular, there has been significant emphasis on the use of undifferentiated progenitor cells, or "stem" cells that can be expanded in culture and differentiated into a variety of different cell types. Recent studies have identified the presence of an abundant source of stem cells in subcutaneous adipose tissue. These cells, termed adipose-derived adult stem (ADAS) cells, show characteristics of multipotent adult stem cells, similar to those of bone marrow derived mesenchymal stem cells (MSCs), and under appropriate culture conditions, synthesize cartilage-specific matrix proteins that are assembled in a cartilaginous extracellular matrix. The growth and chondrogenic differentiation of ADAS cells is strongly influenced by factors in the biochemical as well as biophysical environment of the cells. Furthermore, there is strong evidence that the interaction between the cells, the extracellular biomaterial substrate, and growth factors regulate ADAS cell differentiation and tissue growth. Overall, ADAS cells show significant promise for the development of functional tissue replacements for various tissues of the musculoskeletal system.