Embryonic stem (ES) cells are considered to be a potential tool for repairing articular cartilage defects, but so far it has been impossible to cause these cells to differentiate into chondrocytes exclusively, either in vivo or in vitro. To explore a potential new cell source of cell transplantation for articular cartilage defects, we transplanted ES cells into articular cartilage defects in immunosuppressed rats. ES cells (AB2.2 or CCE cells) were transplanted into articular cartilage defects in the patellar groove of immunosuppressed rats treated with cyclosporine. The cells were histologically observed until 8 weeks after transplantation. To determine whether the repair tissue in the defect in the AB2.2-transplanted group was derived from the transplanted cells, the neomycin-resistant gene, which had been transfected into AB2.2 cells but does not exist in rat cells, was used for detection. The cells produced cartilage, resulting in repair of the defects from 4 weeks until 8 weeks after the transplantation without forming any teratomas. The neomycin-resistant gene was detected in every sample, demonstrating that the repair tissue in the AB2.2-transplanted group was derived from the transplanted AB2.2 cells. The environment of osteochondral defects is chondrogenic for ES cells. ES cells may thus be a potential tool for repairing articular cartilage defects.