Injured cartilage tissue has a limited capacity to heal. There is increasing need for the development of biologically based approaches for cartilage repair. The ultimate aim is to repair the damaged cartilage tissue with new functional tissue using living cells (alone or in combination with suitable scaffolds) that will integrate with the patients remaining tissue and yield a regenerated functional joint, which could continue to repair itself and maintain tissue homeostasis, and remain functional throughout the life of the patient. Cell therapy approaches represent a novel strategy in the treatment of cartilage diseases. Among the different types of stem/progenitor cells that are currently being evaluated, the benefits and limitations of approaches using embryonic and adult stem cells will ultimately depend on factors related to efficacy and safety. To achieve these goals a clear and profound understanding of the molecular determinants of chondrocyte differentiation and cartilage tissue formation is essential, including the specific effect of trophic factors guiding the chondrogenic differentiation process, their relationship with the tissue microenvironment, and how they translate to an epigenetically stable and homogeneous functional tissue. Despite the increasing progress in the application of human embryonic stem cells for cartilage repair, ethical and safety concerns (primarily teratoma and tumor formation) remain to be resolved. Adult stem cells have demonstrated the greatest promise and bone marrow-derived stromal cell subpopulations represent the most widely studied cell types. Developmentally immature marrow stromal cells have been isolated by several groups which appear capable of meeting most, if not all, of the criteria needed for a successful approach. Here we will review the use of embryonic and adult stem cells for cartilage tissue engineering.