Stem cell based tissue engineering has emerged as a promising strategy for articular cartilage regeneration. Foetal derived mesenchymal stem cells (MSCs) with their ease of availability, pluripotency and high expansion potential have been demonstrated to be an attractive cell source over adult MSCs. However, there is a need for optimisation of chondrogenic signals to direct the differentiation of these multipotent MSCs to chondrogenic lineage. In this study we have demonstrated the in vitro chondrogenesis of human umbilical cord matrix MSCs in three dimensional PVA-PCL (polyvinyl alcohol-polycaprolactone) scaffolds in the presence of the individual growth factors TGFβ1, TGFβ3, IGF, BMP2 and their combination with BMP2. Gene expression, histology and immunohistology were evaluated after 28 d culture. The induced cells showed the feature of chondrocytes in their morphology and expression of typical chondrogenic extracellular matrix molecules. Moreover, the real-time PCR assay has shown the expression of gene markers of chondrogenesis, SOX9, collagen type II and aggrecan. The expression of collagen type I and collagen type X was also evaluated. This study has demonstrated the successful chondrogenic induction of human umbilical cord MSCs in 3D scaffolds. Interestingly, the growth factor combination of TGF-β3 and BMP-2 was found to be more effective for chondrogenesis as shown by the real-time PCR studies. The findings of this study suggest the importance of using growth factor combinations for successful chondrogenic differentiation of umbilical cord MSCs.