Mesenchymal stem cells (MSCs) are an attractive cell source for cartilage tissue engineering and regenerative medicine. However, the use of these cells has been limited by their reduced ability to form functional tissue compared to chondrocytes when placed in three-dimensional culture systems. To optimize MSC functional chondrogenesis, we examined the effects of increasing seeding density and transient application of transforming growth factor beta 3 (TGF-beta3), two factors previously shown to improve growth of chondrocyte-based constructs. Chondrocytes seeded in agarose at 20 million cells/mL and MSCs seeded at 20 or 60 million cells/mL agarose were cultured for 7 weeks under continuous or transient application of TGF-beta3. In the transient group, cell-laden constructs were exposed to TGF-beta3 for the initial 3 weeks, followed by 4 weeks of culture in medium without TGF-beta3. Compressive properties, biochemical content, and gene expression were assessed at 3, 5, and 7 weeks. Matrix distribution and collagen type was determined using histology and immunohistochemistry, and chondrogenic and osteogenic markers were assessed using real-time polymerase chain reaction. When maintained continuously with TGF-beta3, chondrocyte-seeded constructs achieved a higher equilibrium compressive modulus than MSCs similarly maintained. Although properties of both groups increased with respect to starting values, there was no difference in bulk mechanical or biochemical properties with higher seeding density when MSCs were cultured with constant TGF-beta3. Findings also showed that while transient application of TGF-beta3 elicited robust growth from chondrocyte-laden gels, MSCs seeded at the same density failed to respond, although constructs maintained their previously accrued properties and continued to express cartilaginous genes after TGF-beta3 removal. Conversely, MSCs seeded at 60 million cells/mL exhibited a strong anabolic response with transient TGF-beta3 exposure, achieving an equilibrium modulus of approximately 200 kPa. Although this represents the highest modulus we have been able to achieve with MSC-seeded constructs using our culture system, further work remains to optimize MSC chondrogenesis for cartilage tissue engineering, particularly in terms of collagen content and dynamic mechanical properties.