Tissue engineering strategies for cartilage aim to restore the complex biomechanical and biochemical properties of the native cartilage. To mimic the in vivo microenvironment, we developed a novel scaffold based on chitosan-agarose (CHAG scaffold) resembling the properties of native cartilage extracellular matrix (ECM) that aids in vitro cartilage formation. The CHAG scaffolds had pore size ranging from 75 to 300 µm and the degradation of 18% over 6 months in PBS. L929 cells and Human Wharton's Jelly-Mesenchymal Stem Cells (HWJ-MSCs) attached well and grew in the CHAG scaffolds. HWJ-MSCs seeded on CHAG scaffolds and cultured in chondrogenic medium were able to differentiate into chondrogenic lineage. Simultaneous supplementation of growth factors (BMP-2, TGF-β3) significantly enhanced chondrogenesis and neo ECM synthesis. CHAG scaffolds seeded with HWJ-MSCs cultured in chondrogenic media supplemented with both BMP-2 and TGF-β3 produced 12.71 ± 1.0 µg GAG/µg DNA compared to the one which received no or either of the growth factors. Our findings suggest that CHAG scaffolds could be used as a biomaterial scaffold for cell mediated repair approaches based on HWJ-MSCs for articular cartilage. © 2016 Wiley Periodicals, Inc. J Biomed Mater Res Part A: 105A: 1845–1855, 2017. © 2017 Wiley Periodicals, Inc.