Current tissue engineering approaches to regeneration of articular cartilage rarely restore the tissue to its normal state because the generated tissue lacks the intricate zonal organization of the native cartilage. Zonal regeneration of articular cartilage is hampered by the lack of knowledge for the relation between physical, mechanical, and biomolecular cues and zone-specific chondrogenic differentiation of progenitor cells. This work investigated in 3D the effect of TGF-β1, zone-specific growth factors, optimum matrix stiffness, and adding nanofibers on the expression of chondrogenic markers specific to the superficial, middle, and calcified zones of articular cartilage by the differentiating human mesenchymal stem cells (hMSCs). Growth factors included BMP-7, IGF-1, and hydroxyapatite (HA) for the superficial, middle, and calcified zones, respectively; optimum matrix stiffness was 80 kPa, 2.1 MPa, and 320 MPa; and nanofibers were aligned horizontal, random, and perpendicular to the gel surface. hMSCs with zone-specific cell densities were encapsulated in engineered hydrogels and cultured with or without TGF-β1, zone-specific growth factor, optimum matrix modulus, and fiber addition and cultured in basic chondrogenic medium. The expression of encapsulated cells was measured by mRNA, protein, and biochemical analysis. Results indicated that zone-specific matrix stiffness had a dominating effect on chondrogenic differentiation of hMSCs to the superficial and calcified zone phenotypes. Addition of aligned nanofibers parallel to the direction of gel surface significantly enhanced expression of Col II in the superficial zone chondrogenic differentiation of hMSCs. Conversely, biomolecular factor IGF-1 in combination with TGF-β1 had a dominating effect on the middle zone chondrogenic differentiation of hMSCs. Results of this work could potentially lead to the development of multilayer grafts mimicking the zonal organization of articular cartilage.