Recently, bone marrow-derived mesenchymal stem cells (MSCs) have been paid more attention for cartilage regeneration. This study evaluated the potential of using MSCs seeded in plasmid transforming growth factor beta1 (pTGF-beta1)-activated three-dimensional chitosan/gelatin scaffolds for improving cartilage repair in vivo. Significant cell proliferation and transforming growth factor beta1 protein expression were observed in vitro in pTGFbeta1-activated scaffolds. Transforming growth factor beta1-activated scaffolds showed high collagen type II and aggrecan expression and low collagen type I expression during in vitro cultivation. MSC-based pTGF-beta1-activated scaffolds also exhibited cartilage histology with high secretion of collagen type II in vitro under the stimulation of pTGF-beta1. In rabbits with full-thickness cartilage defects, the implantation of MSC-based pTGF-beta1-activated scaffolds not only significantly promoted chondrogenic differentiation of MSCs and hyalin-like cartilage matrix synthesis, but also remarkably improved the overall repair of rabbit cartilage defects and exhibited favorable tissue integrity at 10 weeks postsurgery. These results suggest that MSC-based localized pTGF-beta1-activated scaffolds have potential applications for in vivo cartilage repair.