During embryonic development, morphogenetic processes give rise to a variety of shapes and patterns that lead to functional tissues and organs. While the impact of chemical signals on these processes is widely studied, the role of physical cues is less understood. The aim of this study was to test the hypothesis that the interplay of cell mediated contraction and mechanical boundary conditions alone can result in spatially regulated differentiation in simple 3D constructs. An experimental model consisting of a 3D cell-gel construct and a finite element (FE) model were used to study the effect of cellular traction exerted by mesenchymal stem cells (MSCs) on an initially homogeneous matrix under inhomogeneous boundary conditions. A robust shape change is observed due to contraction under time-varying mechanical boundary conditions, which is explained by the finite element model. Furthermore, distinct local differences in osteogenic differentiation are observed, with a spatial pattern independent of osteogenic factors in the culture medium. Regions that are predicted to have experienced relatively high shear stress at any time during contraction correlate with the regions of distinct osteogenesis. Taken together, these results support the underlying hypothesis that cellular contractility and mechanical boundary conditions alone can result in spatially regulated differentiation. These results will have important implications for tissue engineering and regeneration.