We investigated the effectiveness of integrating tissue engineered cartilage derived from human bone marrow derived stem cells (HBMSCs) to healthy as well as osteoarthritic cartilage mimics using hydroxyapatite (HA) nanoparticles immersed within a hydrogel substrate. Healthy and diseased engineered cartilage from human chondrocytes (cultured in agar gels) were integrated with human bone marrow stem cell (HBMSC)-derived cartilaginous engineered matrix with and without HA, and evaluated after 28 days of growth. HBMSCs were seeded within photopolymerizable poly (ethylene glycol) diacrylate (PEGDA) hydrogels. In addition, we also conducted a preliminary in vivo evaluation of cartilage repair in rabbit knee chondral defects treated with subchondral bone microfracture and cell-free PEGDA with and without HA. Under in vitro conditions, the interfacial shear strength between tissue engineered cartilage derived from HBMSCs and osteoarthritic chondrocytes was significantly higher (p < 0.05) when HA nanoparticles were incorporated within the HBMSC culture system. Histological evidence confirmed a distinct spatial transition zone, rich in calcium phosphate deposits. Assessment of explanted rabbit knees by histology demonstrated that cellularity within the repair tissues that had filled the defects were of significantly higher number (p < 0.05) when HA was used. HA nanoparticles play an important role in treating chondral defects when osteoarthritis is a co-morbidity. We speculate that the calcified layer formation at the interface in the osteoarthritic environment in the presence of HA is likely to have attributed to higher interfacial strength found in vitro. From an in vivo standpoint, the presence of HA promoted cellularity in the tissues that subsequently filled the chondral defects. This higher presence of cells can be considered important in the context of accelerating long-term cartilage remodeling. We conclude that HA nanoparticles play an important role in engineered to native cartilage integration and cellular processes.