Chronic articular cartilage defects are the most common disabling conditions of humans in the western world. The incidence for cartilage defects is increasing with age and the most prominent risk factors are overweight and sports associated overloading. Damage of articular cartilage frequently leads to osteoarthritis due to the aneural and avascular nature of articular cartilage, which impairs regeneration and repair. Hence, patients affected by cartilage defects will benefit from a cell-based transplantation strategy. Autologous chondrocytes, mesenchymal stem cells and embryonic stem cells are suitable donor cells for regeneration approaches and most recently the discovery of amniotic fluid stem cells has opened a plethora of new therapeutic options. It is the aim of this review to summarize recent advances in the use of amniotic fluid stem cells as novel cell sources for the treatment of articular cartilage defects. Molecular aspects of articular cartilage formation as well as degeneration are summarized and the role of growth factor triggered signaling pathways, scaffolds, hypoxia and autophagy during the process of chondrogenic differentiation are discussed.