In vivo cartilage reconstruction at an ectopic site was not successful in immunocompetent animals, possibly because of immunoreaction and the failure of material design. A diffusion chamber, which has been predominantly adopted to study cell differentiation, was effective in preventing host immune rejection, host cell invasion, and vascular invasion. In this study, we proposed to regenerate ectopic cartilage tissue in rabbits by implanting a diffusion-chamber system subcutaneously for 8 weeks. Inside the chamber, biomimetic scaffolds loaded with allogenous chondrocytes from newborn rabbits were enclosed. Tissue with characteristics of cartilage was formed inside the chamber with collagen gel as a scaffold, which was demonstrated using histological, immunohistochemical, and reverse transcriptase polymerase chain reaction assays. In contrast, for implant without diffusion chamber, vascular invasion was observed and results showed much less expression of cartilage extracellular matrix (ECM). Collagen type I hydrogel and sponge were compared as scaffolds. No cartilage tissue was found in the collagen sponge inside the chamber, presumably because of the different cell-seeding characteristics of gel. In addition, allogenous chondrocytes were adopted as a cell resource and were proved viable for the regeneration of cartilage tissue in this model. The results revealed that the diffusion chamber and scaffold design are both important in providing a more favorable biomimetic microenvironment for the formation of cartilage in vivo at an ectopic site, even with allogenous cells. Moreover, preliminary repair of a cartilage defect using the engineered tissue for 4 weeks showed the growth of new cartilage, obtaining a satisfactory interface with the original cartilage inside the defect. The model of engineering cartilage in vivo was proven to be useful. This study is the preliminary exploration for the reconstruction of ectopic cartilage in an immunocompetent host to be applied for cartilage repair. It may provide a valuable reference for the clinical application of cartilage repair.