Mesenchymal stem cells (MSCs) are a promising cell source for the treatment of musculoskeletal disease. However, MSC chondrogenesis in 3D culture generates constructs whose macroscopic (bulk) mechanical properties are inferior to constructs formed with chondrocytes. To investigate where and why these deficits in functionality arise, we assessed the local (microscopic) properties of cell-laden hydrogel constructs. Both chondrocyte-and MSC-laden constructs showed pronounced depth dependency, with ~3.5 and ~11.5 fold decreases in modulus from the surface to central regions, respectively. Importantly, in the surface region, properties were similar, suggesting that MSCs can produce matrix of mechanical equivalence to chondrocytes, but only in conditions of maximal nutrient support. Dynamic culture on an orbital shaker (which enhances diffusion) attenuated depth-dependent disparities in mechanics and improved the bulk properties compared to free swelling conditions (225 to 438 kPa for chondrocytes, 122 to 362 kPa for MSCs). However, properties in MSC-based constructs remained significantly lower due to persistent mechanical deficits in central regions. MSC viability in these central regions decreased markedly, with these changes apparent as early as day 21, while chondrocyte viability remained high. These findings suggest that, under optimal nutrient conditions, MSCs can undergo chondrogenesis and form functional tissue on par with that of the native tissue cell type. However, the lack of viability and matrix production in central regions suggests that chondrogenic MSCs do not yet fully recapitulate the advanced phenotype of the chondrocyte, a cell that is optimized to survive (and thrive) in a mechanically challenging and nutrient-poor environment.