In cartilage tissue engineering from mesenchymal stem cells, it is important to suppress hypertrophy to produce a neocartilage with stable phenotypes of hyaline articular cartilage (AC). The aim of this study was to develop and test the usefulness of functional chondrogenic scaffolds that serve the purpose of hypertrophy suppression. PD98059-impregnated poly(lactic-co-glycolic acid) (PLGA) scaffold is fabricated and compared with transforming growth factor (TGF)-β2-immobilized scaffold. The PD98059 is continuously released from the scaffolds over 140 days in contrast to the rapid release in TGF-β2-immobilized scaffold. The in vitro culture results show that the PD98059-impregated scaffold is more effective in suppressing hypertrophy than the TGF-β2-immobilized scaffold while both scaffolds enhance chondrogenesis from human mesenchymal stem cells. After 10 weeks of in vivo implantation in rabbits, the osteochondral defects is successfully repaired in both PD98059-impregnated and TGF-β2-immobilized scaffold seeded with rabbit mesenchymal stem cells when evaluated grossly and microscopically. However, type X collagen is not observed from regenerated cartilage in PD98059-impregnated scaffold, whereas it is detected around chondrocytes in the TGF-β2-impregnated scaffolds. In addition, the PD98059-impregnated scaffold has better reconstitution of the subchondral plate. These results suggest that the use of the PD98059-impregnated scaffold leads to AC regeneration of better quality and prevents hypertrophy when implanted in the osteochondral defects.