The ideal combination of hydrogel components for regeneration of cartilage and cartilaginous interfaces is a significant challenge because control over differentiation into multiple lineages is necessary. Stabilization of the phenotype of stem cell derived chondrocytes is needed to avoid undesired progression to terminal hypertrophy and tissue mineralization. A novel ternary blend hydrogel composed of methacrylated poly(ethylene glycol) (PEG), gelatin, and heparin (PGH) was designed to guide chondrogenesis by bone marrow derived mesenchymal stem cells (BMSCs) and maintenance of their cartilaginous phenotype. The hydrogel material effects on chondrogenic and osteogenic differentiation by BMSCs were evaluated in comparison to methacrylated gelatin hydrogel (GEL), a conventional bioink used for both chondrogenic and osteogenic applications. PGH and GEL hydrogels were loaded with goat BMSCs and cultured in chondrogenic and osteogenic mediums in vitro over six weeks. The PGH showed no sign of mineral deposition in an osteogenic environment in vitro. To further evaluate material effects, the hydrogels were loaded with adult human BMSCs (hBMSCs) and transforming growth factor β-3 and grown in subcutaneous pockets in mice over eight weeks. Consistent with the in vitro results, the PGH had greater potential to induce chondrogenesis by BMSCs in vivo compared to the GEL as evidenced by elevated gene expression of chondrogenic markers, supporting its potential for stable cartilage engineering. The PGH also showed a greater percentage of GAG positive cells compared to the GEL. Unlike the GEL, the PGH hydrogel exhibited anti-osteogenic effects in vivo as evidenced by negative Von Kossa staining and suppressed gene expression of hypertrophic and osteogenic markers. By nature of their polymer composition alone, the PGH and GEL regulated BMSC differentiation down different osteochondral lineages. Thus, the PGH and GEL are promising hydrogels to regenerate stratified cartilaginous interfacial tissues in situ, such as the mandibular condyle surface, using undifferentiated BMSCs and a stratified scaffold design.