1. Cartilage formation is one of the most complex processes in biology. The aim of the present study was to produce a simplified in vitro system to resolve its complexities. 2. Human mesenchymal stem cells (hMSC) were maintained in alginate beads with a chondrogenesis-induction medium containing 10 ng/mL transforming growth factor (TGF)-beta3. 3. At days 0, 2, 4, 8, 12, 16 and 19 of culture, we examined the cells using a light microscope and a transmission electron microscope. We also evaluated the cells using immunocryo-ultramicrotomy. 4. The present study demonstrated that hMSC produced numerous extracellular matrices containing abnormal collagen fibres following their exposure to a chondrogenesis-induction medium in alginate beads. At this time, calcification was detected by alizarin red staining and electron-dense particles, composed of hydroxyapatite, appeared in both the cytoplasm and the extracellular spaces. 5. In addition immunocryo-ultramicrotomy revealed that collagen type II, type X and proteoglycan were prominent and that osteocalcin was detectable at day 2. During 8-16 days of culture, collagen type X maintained its strong expression and the expression of osteocalcin increased markedly. In contrast, the expression of collagen type II and proteoglycan decreased with time. 6. These findings demonstrate that hMSC rapidly differentiate into chondrocytes expressing collagen type II and proteoglycan. 7. The expression of collagen type II and proteoglycan then dropped and the activity of collagen type X was the same as before (4-8 days). As a result, the cells developed into the next cell type, so-called hypertrophic chondrocytes. Finally, both osteocalcin activity and the calcification of cell bodies and extracellular matrices became evident, indicating endochondral ossification. Thus, we conclude that hMSC rapidly differentiate into chondrocytes, followed by the development of hypertrophic chondrocytes. Endochondral ossification is the final form in this culture. 8. The findings of the present study indicate that our three-dimensional culture is a convenient in vitro model for the investigation of the regulatory mechanisms of cartilage formation and endochondral ossification.