Cartilage offers limited regenerative capacity. Cell-based approaches have emerged as a promising alternative in the treatment of cartilage defects and osteoarthritis. Due to their easy accessibility, abundancy, and chondrogenic potential mesenchymal stromal cells (MSCs) offer an attractive cell source. MSCs are often combined with natural or synthetic hydrogels providing tunable biocompatibility, biodegradability, and enhanced cell functionality. In this review, we focused on the different advantages and disadvantages of various natural, synthetic, and modified hydrogels. We examined the different combinations of MSC-subpopulations and hydrogels used for cartilage engineering in preclinical and clinical studies and reviewed the effects of added growth factors or gene transfer on chondrogenesis in MSC-laden hydrogels. The aim of this review is to add to the understanding of the disadvantages and advantages of various combinations of MSC-subpopulations, growth factors, gene transfers, and hydrogels in cartilage engineering.