This study was conducted to determine physiological and functional features of primary and immortalized canine chondrocytes. Chondrocytes were immortalized by introducing the catalytic component of human telomerase namely human telomerase reverse transcriptase (hTERT). Primary chondrocytes lost their characteristic phenotype and growth properties whereas the immortalized cells remained polygonal with rapid growth rate. The expression of chondrocyte-specific markers decreased many-fold whereas that of chondrocyte-non-specific gene increased in primary chondrocytes. The immortalized cells did not express chondrocyte-specific genes in monolayers. Both primary and immortalized cells were encapsulated in alginate microspheres to construct three-dimensional (3D) culture system. As the primary chondrocytes, also the telomerase-transfected cells adopted a chondrocyte-specific gene expression pattern in alginate culture. Thus, the expression of telomerase represents possibility to expand chondrocytes without limitation while maintaining the chondrocyte-specific phenotype in 3D cultures. Use of such cells provides a standardized tool for testing different tissue engineering applications in canine model.