Controlled differentiation of mesenchymal stem cells (MSCs) into the chondrogenic lineage is crucial for in vitro generation of neocartilage, yet achieving it remains challenging. Traditional protocols for MSC differentiation using exogenous inductive molecules, such as transforming growth factor-β, fall short in meeting the needs of clinical applications because they yield differentiated cells that exhibit hypertrophic characteristics and subsequently facilitate endochondral bone formation. The objective of the current study was to deliver endogenous inductive factors from juvenile articular chondrocytes to bone marrow-derived MSCs to drive MSC chondrogenic differentiation through cocultivation of the two cell types in the absence of direct physical contact and exogenous stimulators. An initial chondrocyte/MSC ratio of 63:1 was identified as the appropriate proportion of the two cell populations to ensure that coculture-driven MSC-differentiated (CDMD) cells replicated the cellular morphology, behavior, and phenotype of articular chondrocytes. In a three-dimensional agarose system, CDMD cells were further shown to develop into robust neocartilage structurally and mechanically stronger than chondrocyte-laden constructs and with reduced hypertrophic potential. Although MSCs tended to lose the ability to express CD44, an important regulator in cartilage biology, during the coculture induction, CDMD cells regained this function in the three-dimensional tissue cultivation. The present work establishes a chondrocyte/MSC coculture model that serves as a template to better understand chondrocyte-driven MSC differentiation and provides insights for improved strategies to develop clinically relevant cartilage tissue replacements.