Mesenchymal stromal cells (MSCs), which reside within various tissues, are utilized in the engineering of cartilage tissue. Dexamethasone (DEX)--a synthetic glucocorticoid--is almost invariably applied to potentiate the growth-factor-induced chondrogenesis of MSCs in vitro, albeit that this effect has been experimentally demonstrated only for transforming-growth-factor-beta (TGF-β)-stimulated bone-marrow-derived MSCs. Clinically, systemic glucocorticoid therapy is associated with untoward side effects (e.g., bone loss and increased susceptibility to infection). Hence, the use of these agents should be avoided or limited. We hypothesize that the influence of DEX on the chondrogenesis of MSCs depends upon their tissue origin and microenvironment [absence or presence of an extracellular matrix (ECM)], as well as upon the nature of the growth factor. We investigated its effects upon the TGF-β1- and bone-morphogenetic-protein 2 (BMP-2)-induced chondrogenesis of MSCs as a function of tissue source (bone marrow vs. synovium) and microenvironment [cell aggregates (no ECM) vs. explants (presence of a natural ECM)]. In aggregates of bone-marrow-derived MSCs, DEX enhanced TGF-β1-induced chondrogenesis by an up-regulation of cartilaginous genes, but had little influence on the BMP-2-induced response. In aggregates of synovial MSCs, DEX exerted no remarkable effect on either TGF-β1- or BMP-2-induced chondrogenesis. In synovial explants, DEX inhibited BMP-2-induced chondrogenesis almost completely, but had little impact on the TGF-β1-induced response. Our data reveal that steroids are not indispensable for the chondrogenesis of MSCs in vitro. Their influence is context dependent (tissue source of the MSCs, their microenvironment and the nature of the growth-factor). This finding has important implications for MSC based approaches to cartilage repair.