Human induced pluripotent stem cells (hiPSCs) exhibit pluripotency, proliferation capability, and gene expression similar to those of human embryonic stem cells (hESCs). hESCs readily form cartilaginous tissues in teratomas in vivo; despite extensive effort, however, to date no efficient method for inducing mature chondrocytes in vitro has been established. hiPSCs can also differentiate into cartilage in vivo by teratoma formation, but as with hESCs, no reliable system for in vitro chondrogenic differentiation of hiPSCs has yet been reported. Here, we examined the chondrogenic differentiation capability of hiPSCs using a multistep culture method consisting of embryoid body (EB) formation, cell outgrowth from EBs, monolayer culture of sprouted cells from EBs, and 3-dimensional pellet culture. In this culture process, the cell density of monolayer culture was critical for cell viability and subsequent differentiation capability. Monolayer-cultured cells exhibited fibroblast-like morphology and expressed markers for mesenchymal stem cells. After 2-3 weeks of pellet culture, cells in pellets exhibited a spherical morphology typical of chondrocytes and were surrounded by extracellular matrix that contained acidic proteoglycans. The expression of type II collagen and aggrecan in pellets progressively increased. Histological analysis revealed that over 70% of hiPSC-derived pellets successfully underwent chondrogenic differentiation. Using the same culture method, hESCs showed similar histological changes and gene expression, but differentiated slightly faster and more efficiently than hiPSCs. Our study demonstrates that hiPSCs can be efficiently differentiated into the chondrogenic lineage in vitro via generation of mesenchymal progenitor cells, using a simplified, multistep culture method.