The rapidly growing field of tissue engineering and regenerative medicine has brought about an increase in demand for biomaterials that mimic closely the form and function of biological tissues. Therefore, understanding the cellular response to the changes in material composition moves research one step closer to a successful tissue-engineered product. With this in mind, polyethylene glycol (PEG) hydrogels comprised of different concentrations of polymer (2.5%, 4%, 6.5%, or 8% (w/v)); different protease sensitive, peptide cross-linkers (VPMSMRGG or GPQGIWGQ); and the incorporation or lack of a peptide cell adhesion ligand (RGD) were screened for their ability to support in vitro chondrogenesis. Human periosteum-derived cells (hPDCs), a mesenchymal stem cell (MSC)-like primary cell source, and ATDC5 cells, a murine carcinoma-derived chondrogenic cell line, were encapsulated within the various hydrogels to assess the effects of the different formulations on cellular viability, proliferation, and chondrogenic differentiation while receiving exogenous growth factor stimulation via the medium. Through the results of this screening process, the 6.5% (w/v) PEG constructs, cross-linked with the GPQGIWGQ peptide and containing the RGD cell binding molecule, demonstrated an environment that consistently supported cellular viability and proliferation as well as chondrogenic differentiation.