Mesenchymal stromal cells (MSC) are a promising tool for tissue engineering of the intervertebral disc (ID). The IDs are characterized by hypoxia and, after degeneration, by an inflammatory environment as well. We therefore investigated the effects of inflammation induced with interleukin (IL)-1beta and of hypoxia (2% O(2)) on the chondrogenic differentiation of MSC. METHODS: Bone-marrow-derived MSC (bmMSC) were cultured in a fetal-calf-serum-free medium and characterized according to the minimal criteria for multipotent MSC. Chondrogenic differentiation of MSC was induced following standard protocols, under hypoxic conditions, with or without IL-1beta supplementation. After 28 days of differentiation, micromasses were analyzed by histochemical staining and immunohistochemistry and by determining the mRNA level of chondrogenic marker genes utilizing quantitative RT-PCR. RESULTS: Micromasses differentiated under IL-1beta supplementation are smaller and express less extracellular matrix (ECM) protein. Micromasses differentiated under hypoxia appear larger in size, display a denser ECM and express marker genes comparable to controls. The combination of hypoxia and IL-1beta supplementation improved chondrogenesis compared to IL-1beta supplementation alone. Micromasses differentiated under standard conditions served as controls. CONCLUSION: Inflammatory processes inhibit the chondrogenic differentiation of MSC. This may lessen the regenerative potential of MSC in situ. Thus, for the cell therapy of IDs using MSC to be effective it will be necessary to manage the inflammatory conditions in situ. In contrast, hypoxic conditions exert beneficial effects on chondrogenesis and phenotype stability of transplanted MSC, and may improve the quality of the generated ECM.