Dental-derived MSCs are promising candidates for cartilage regeneration, with high chondrogenic differentiation capacity. This property contributes to making dental MSCs an advantageous therapeutic option compared to current treatment modalities. The MSC delivery vehicle is the principal determinant for the success of MSC-mediated cartilage regeneration therapies. The objectives of this study were to: (1) develop a novel co-delivery system based on TGF-β1 loaded RGD-coupled alginate microspheres encapsulating Periodontal Ligament Stem Cells (PDLSCs) or Gingival Mesenchymal Stem Cells (GMSCs); and (2) investigate dental MSC viability and chondrogenic differentiation in alginate microspheres. The results revealed the sustained release of TGF-β1 from the alginate microspheres. After 4 weeks of chondrogenic differentiation in vitro, PDLSCs, GMSCs as well as human bone marrow mesenchymal stem cells (hBMMSC) (as positive control) revealed chondrogenic gene expression markers (Col II and Sox-9) via qPCR, as well as matrix positively stained by toluidine blue and safranin-O. In animal studies, ectopic cartilage tissue regeneration was observed inside and around the transplanted microspheres, confirmed by histochemical and immunofluorescent staining. Interestingly, PDLSCs showed more chondrogenesis than GMSCs and hBMMSCs (P