When using hydrogel scaffolds for cartilage tissue engineering, two gel properties are particularly important: the equilibrium water content (q, equilibrium swelling ratio) and the compressive modulus, K. In this work, chondrocytes were photoencapsulated in degrading and nondegrading poly(ethylene glycol)-based hydrogels to assess extracellular matrix (ECM) formation as a function of these gel properties. In nondegrading gels, the glycosaminoglycan (GAG) content was not significantly different in gels when q was varied from 4.2 to 9.3 after 2 and 4 weeks in vitro. However, gels with a q of 9.3 allowed GAGs to diffuse throughout the gels homogenously, but a q < or = 5.2 resulted in localization of GAGs pericellularly. Interestingly, in the moderately crosslinked gels with a K of 360 kPa, an increase in type II collagen synthesis was observed compared with gels with a higher (960 kPa) and lower (30 kPa) K after 4 weeks. With the incorporation of degradable linkages into the network, gel properties with an initially high K (350 kPa) and final high q (7.9) were obtained, which allowed for increased type II collagen synthesis coupled with a homogenous distribution of GAGs. Thus, a critical balance exists between gel swelling, mechanics, and degradation in forming a functional ECM.