Mesenchymal stem/progenitor cells and induced pluripotent stem cells have become viable cell sources for prospective cell-based cartilage engineering and tissue repair. The development and function of stem cells are influenced by the tissue microenvironment. Specifically, the local tissue microenvironment can dictate how stem cells integrate into the existing tissue matrix and how successfully they can restore function to the damaged area in question. This review focuses on the microenvironmental features of articular cartilage and how they influence stem cell–based cartilage tissue repair. Also discussed are current tissue-engineering strategies used in combination with cell-based therapies, all of which are designed to mimic the natural properties of cartilage tissue in order to achieve a better healing response.