An attractive cell source for cartilage tissue engineering, human adipose-derived stem cells (hASCs) can be easily expanded and signaled to differentiate into chondrocytes. This study explores the influence of growth factor distribution and release kinetics on cartilage formation within 3D hASC constructs incorporated with transforming growth factor-β1 (TGF-β1)-loaded gelatin microspheres. The amounts of microspheres, TGF-β1 concentration, and polymer degradation rate were varied within hASC aggregates. Microsphere and TGF-β1 loading concentrations were identified that resulted in glycosaminoglycan (GAG) production comparable to those of control aggregates cultured in TGF-β1-containing medium. Self-assembling hASC sheets were then engineered for the production of larger, more clinically relevant constructs. Chondrogenesis was observed in hASC-only sheets cultured with exogenous TGF-β1 at 3 weeks. Importantly, sheets with incorporated TGF-β1-loaded microspheres achieved GAG production similar to sheets treated with exogenous TGF-β1. Cartilage formation was confirmed histologically via observation of cartilage-like morphology and GAG staining. This is the first demonstration of the self-assembly of hASCs into high-density cell sheets capable of forming cartilage in the presence of exogenous TGF-β1 or with TGF-β1-releasing microspheres. Microsphere incorporation may bypass the need for extended in vitro culture, potentially enabling hASC sheets to be implanted more rapidly into defects to regenerate cartilage in vivo.