The stemness of bone marrow mesenchymal stem cells (BMSCs) is maintained by hypoxia. The oxygen level increases from vessel-free cartilage to hypoxic bone marrow and, furthermore, to vascularized bone, which might direct the chondrogenesis to osteogenesis and regenerate the skeletal system. Hence, oxygen was diffused from relatively low to high levels throughout a three-dimensional chip. When we cultured BMSCs in the chip and implanted them into the rabbit defect models of low-oxygen cartilage and high-oxygen calvaria bone, (i) the low oxygen level (base) promoted stemness and chondrogenesis of BMSCs with robust antioxidative potential; (ii) the middle level (two times ≥ low) pushed BMSCs to quiescence; and (iii) the high level (four times ≥ low) promoted osteogenesis by disturbing the redox balance and stemness. Last, endochondral or intramembranous osteogenesis upon transition from low to high oxygen in vivo suggests a developmental mechanism-driven solution to promote chondrogenesis to osteogenesis in the skeletal system by regulating the oxygen environment.