Osteoarthritis (OA) is the most common joint disease and the leading cause of disability in the developed countries. Its clinical manifestations include pain and impairment to movement, and often affect surrounding tissues with symptoms of local inflammation. It is a progressively debilitating disease that is often associated with injury and aging. However, current pharmacological and surgical treatment modalities ultimately fail to stall the progression of OA. Viable treatment options are in need, and current effort of cartilage tissue engineering and regeneration, especially using chondroprogenitor cells, such as adult mesenchymal stem cells (MSCs), has offered hope of eventual success. First, ex vivo MSC cartilage tissue engineering can potentially produce effective replacement constructs for focal cartilage defects to prevent the progression to OA. This paper will review the factors important for cartilage tissue engineering, including cells, scaffold, and environment, as well as current problems and areas that await more research. Secondly, MSCs possess the capacity to function as a systematic regulator, to influence the local environment, via direct or indirect interactions, including soluble factors. Through these functions, MSCs can enhance local progenitor cell mediated regeneration, confer immunomodulation and anti-inflammatory effects, which can prove to be critically important in the setting of cell therapy for OA, a degenerative disease with associated local inflammation. Taken together, MSCs, used either as a structural substitute in a tissue engineered construct, or in cell therapy utilizing their modulating functions, or both, present promise in the treatment of OA, although clearly more research is needed to achieve this ultimate goal.