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Osteoarthritis remains a poorly treatable outcome of traumatic cartilage injury as cartilage is unable to self-repair. Transplantation of an engineered, osteochondral tissue plug has been proposed as a better way to achieve repair of cartilage defects with implants that can readily integrate with the subchondral bone. Composite materials composed of chitosan and glycosaminoglycans (GAGs) have been shown to support rapid invasion and integration with host tissues post-implantation and are a promising platform for assembling such an osteochondral implant. In this study we explored the use of bone marrow-derived mesenchymal stem cells (MSCs) within glycosaminoglycan-chitosan capsules as a platform for generating spherical cartilage and bone tissue “modules” for use in assembling an osteochondral construct. Rat bmMSCs were suspended (1×10⁷ cells/ml) in a solution of 1.5 wt% carboxymethylcellulose (CMC), 4 wt% chondroitin 4-sulfate (CS), and 1 mg/ml collagen type I. The suspension was then electrosprayed to generate uniform droplets that were captured into a stirred and grounded chitosan solution (0.6 wt%). Electrostatic interactions between negatively charged GAGs and positively charged chitosan results in the formation of hollow microcapsules (300-500 µm in diameter) entrapping MSCs at high density. The encapsulated MSCs were cultured under static conditions in either osteogenic or chondrogenic induction medium for either 28 days (osteogenic) or 42 days (chondrogenic). Between 28 and 42 days osteogenically induced capsules were maintained in MSC growth medium. Capsule cultures were sampled at intervals and analyzed to evaluate cell/biomaterial morphology, DNA content, and extracellular matrix composition. After loose capsule culture, osteogenic and chondrogenic capsules were used to generate osteochondral constructs as follows. Cultured capsules were first briefly washed with 0.1 wt% chitosan followed by a wash with 0.1 wt% glycidyl-methacrylated polygalacturonic acid (GMA-PGA) to deposit a photocrosslinkable polyelectrolyte film. A transparent cylindrical mold was then loaded with a 4 mm layer of coated osteogenic capsules followed by a 4 mm layer of coated chondrogenic capsules. The mold was then immersed in PBS and capsule fusion was induced by photocrosslinking with 400 nM light using LAP as the photoinitiator. The fused constructs were then cultured for an additional 15 days in MSC growth medium. Results to date demonstrated the feasibility of the culture, coating and photocrosslinking method of osteochondral assembly using long-term cultured GAG-chitosan capsules. In addition, GMA-PGA was found to be an efficient, photocrosslinkable surface coating for generating fused capsule constructs.