Degenerative joint disease or osteoarthritis (OA) remains one of the major problems in modern medicine. One of the key pathological features of OA is death of cartilage forming cells – chondrocytes. Unfortunately chondrocytes have minimal regenerative capacity. Generation of functional chondrocytes from human embryonic stem cells may represent novel approach for cartilage repair. Recent tests in our laboratory have shown the embryonic stem cell (ESC)-derived cartilage cells are similar to cartilage cells in the joints. However, these cells are proliferative and functional only in the presence of specific factors forming so-called cartilage cell niche. Unfortunately this niche becomes dysfunctional with aging making survival of transplanted ESC-derived chondrocytes nearly impossible. We have now defined the most important molecular pathways responsible for the maintenance of the most primitive cartilage cells. Co-transplantation of the ECS-derived chondrocytes and these molecules is expected to yield the most efficient functional outcomes in patients with arthritis. This work may provide new transplantation opportunities for patients with cartilage injury or arthritis and delay or even prevent these patients from needing joint replacement procedures. In addition to detailed basic studies the work in our lab is now focused on generating ESC-derived chondrocytes on a large scale and testing their ability to repair cartilage injuries.