Current methods for correcting articular cartilage defects are limited by a scarcity of cartilage cells. Here we describe a novel method for the conversion of human dermal fibroblasts to chondrocyte-like cells and the potential application of this methodology to cartilage tissue engineering. Human neonatal foreskin fibroblasts were seeded on two-dimensional, tissue culture polystyrene (TCPS) in high density micromass cultures in the presence of staurosporine (50-200 nM), a protein kinase C (PKC) inhibitor, and lactic acid (40 mM) to induce functional hypoxia. Dermal fibroblasts were similarly cultured on three-dimensional polymer scaffolds composed of a non-woven polyglycolic acid (PGA) fiber mesh reinforced in a dilute solution of poly(L-lactic acid) (PLLA). At 24 hours, northern analysis revealed a staurosporine dose-dependent increase in aggrecan core protein expression in lactate-treated micromass cultures on TCPS, while type I collagen gene expression was virtually abolished in all cultures supplemented with staurosporine. The cells in these cultures displayed a rounded, cobblestone-shaped morphology typical of differentiated chondrocytes (most pronounced at 200 n.M staurosporine and 40 mM lactate), and were organized into nodules which stained positively with Alcian blue. When seeded on PGA/PLLA matrices under identical conditions as described for TCPS, a chondrocyte-like morphology was observed in cultures treated with lactate and staurosporine in contrast to the flattened sheets of fibroblast-like cells seen in untreated controls. Taken together, the above findings suggest that staurosporine treatment coupled with high density micromass culture in the presence of lactate induces chondrogenic differentiation in human dermal fibroblasts, and that these cells may be used in concert with three-dimensional polymer scaffolds for the repair of articular cartilage lesions.