Horseradish peroxidase (HRP)-catalyzed hydrogels are considered to be an important platform for tissue engineering applications. In this study, we investigated the chondrogenic capacity of phenolated (1.2%) alginate-(0.5%) collagen hydrogel on human amniotic mesenchymal stem cells after 21 days. Using NMR, FTIR analyses, and SEM imaging, we studied the phenolation and structure of alginate-collagen hydrogel. For physicochemical evaluations, gelation time, mechanical properties, swelling, and degradation rate were assessed. The survival rate was monitored using the MTT assay and DAPI staining. Western blotting was performed to measure the chondrogenic differentiation of cells. NMR showed successful phenolation of the alginate-collagen hydrogel. FTIR exhibited the interaction between the functional groups of collagen with phenolated alginate. SEM showed the existence of collagen microfibrils in the alginate-collagen hydrogel. Compared to phenolated alginate, the addition of collagen increased hydrogel elasticity by 10%. Both swelling rate and biodegradability were reduced in the presence of collagen. We noted an increased survival rate in phenolated alginate-collagen compared to the control cells (p < 0.05). Western blotting revealed the increase of chondrocyte-associated proteins such as SOX9 and COL2A1 in phenolated-alginate-collagen hydrogels after 21 days. These data showed that phenolated alginate-collagen hydrogel is an appropriate 3 D substrate to induce chondrogenic capacity of human mesenchymal stem cells.