The newly evolved field of regenerative medicine is offering solutions in the treatment of bone or cartilage loss and deficiency. Mesenchymal stem cells, as well as articular chondrocytes, are potential cells for the generation of bone or cartilage. The natural mechanism of bone formation is that of endochondral ossification, regulated, among other factors, through the hormones dexamethasone and triiodothyronine. We investigated the effects of these hormones on articular chondrocytes and chondrogenically differentiated mesenchymal stem cells, hypothesizing that these hormones would induce terminal differentiation, with chondrocytes and differentiated stem cells being similar in their response. Using a 3D-alginate cell culture model, bovine chondrocytes and chondrogenically differentiated stem cells were cultured in presence of triiodothyronine or dexamethasone, and cell proliferation and extracellular matrix production were investigated. Collagen mRNA expression was measured by real-time PCR. Col X mRNA and alkaline phosphatase were monitored as markers of terminal differentiation, a prerequisite of endochondral ossification. The alginate culture system worked well, both for the culture of chondrocytes and for the chondrogenic differentiation of mesenchymal stem cells. Dexamethasone led to an increase in glycosaminoglycan production. Triiodothyronine increased the total collagen production only in chondrocytes, where it also induced signs of terminal differentiation, increasing both collagen X mRNA and alkaline phosphatase activity. Dexamethasone induced terminal differentiation in the differentiated stem cells. The immature articular chondrocytes used in this study seem to be able to undergo terminal differentiation, pointing to their possible role in the onset of degenerative osteoarthritis, as well as their potential for a cell source in bone tissue engineering. When chondrocyte-like cells, after their differentiation, can indeed be moved on towards terminal differentiation, they can be used to generate a model of endochondral ossification, but this limitation must be kept in mind when using them in cartilage tissue engineering application.