Articular cartilage (AC) lacks the ability to self-repair and cell-based approaches, primarily based on using chondrocytes and mesenchymal stem cells (MSCs), are emerging as effective technology to restore cartilage functionality, because cells synergic functionality may support the maintenance of chondrogenic phenotype and promote extracellular matrix regeneration. This work aims to develop a more physiologically representative co-culture system to investigate the influence of MSCs on the activity of chondrocytes. A thermo-sensitive chitosan-based hydrogel, ionically crosslinked with β-glycerophosphate, is optimised to obtain sol/gel transition at physiological conditions within 5 minutes, high porosity with pores diameter <30 µm, and in vitro mechanical integrity with compressive and equilibrium Young's moduli of 37 kPa and 17 kPa, respectively. Live/dead staining showed that after 1 and 3 days in culture, the encapsulated MSCs into the hydrogels are viable and characterised by round-like morphology. Furthermore chondrocyte spheroids, seeded on top of gels that contained either MSCs or no cells, show that the encapsulated MSCs stimulate chondrocyte activity within a gel co-culture, both in terms of maintaining the coherence of chondrocyte spheroids, leading to a larger quantity of CD44 (by immunofluorescence) and a higher production of collagen and glycosaminoglycans (by histology) compared with the mono-culture.