Cell sheet engineering has developed as a remarkable method for cell transplantation. In the field of cartilage regeneration, several studies previously reported that cartilage defects could be regenerated by transplantation of a chondrocyte sheet using cell sheet engineering. However, it remains unclear how such a thin cell sheet could repair a deep cartilage defect. We, therefore, focused on the mechanism of cartilage repair using cell sheet engineering in this study. Chondrocyte sheets and synovial cell sheets were fabricated using cell sheet engineering, and these allogenic cell sheets were transplanted to cover an osteochondral defect in a rat model. Macroscopic and histological evaluation was performed at 4 and 12 weeks after transplantation. Analysis of the gene expression of each cell sheet and of the regenerated tissue at 1 week after transplantation was performed. In addition, green fluorescent protein (GFP) transgenic rats were used as donors (transplanted chondrocyte sheets) or recipients (osteochondral defect models) to identify the cell origin of regenerated cartilage. Cartilage repair was significantly better in the group implanted with a chondrocyte sheet than in that with a synovial cell sheet. The results of gene expression analysis suggest that the possible factor contributing to cartilage repair might be TGFβ1. Cell tracking experiments using GFP transgenic rats showed that the regenerated cartilage was largely composed of cells derived from the transplanted chondrocyte sheets.