Bone marrow-derived mesenchymal stromal stem cells (BMSCs) are a promising cell source for treating articular cartilage defects. Quality of cartilaginous repair tissue following BMSC transplantation has been shown to correlate with functional outcome. Therefore, tissue-engineering variables, such as cell expansion environment and seeding density of scaffolds, are currently under investigation. The objectives of this study were to demonstrate chondrogenic differentiation of BMSCs seeded within a collagen I scaffold following isolation and expansion in two-dimensional (2D) and three-dimensional (3D) environments, and assess the impact of seeding density on Ovine BMSCs were isolated in a 2D environment by plastic adherence, expanded to passage two in flasks containing expansion medium, and seeded within collagen I scaffolds (6 mm diameter, 3.5 mm thickness and 0.115 ± 0.020 mm pore size; Integra LifeSciences Corp.) at densities of 50, 10, 5, 1, and 0.5 million BMSCs/cm3. For 3D isolation and expansion, bone marrow aspirates containing known quantities of mononucleated cells (BMNCs) were seeded on scaffolds at 50, 10, 5, 1, and 0.5 million BMNCs/cm3 and cultured in expansion medium for an equivalent duration to 2D expansion. All cell-scaffold constructs were differentiated Two dimensional-expanded BMSCs seeded at all densities were capable of proteoglycan production and displayed increased expressions of aggrecan and collagen II mRNA relative to pre-differentiation controls. Collagen II deposition was apparent in scaffolds seeded at 0.5–10 million BMSCs/cm3. Chondrogenesis of 2D-expanded BMSCs was most pronounced in scaffolds seeded at 5–10 million BMSCs/cm3 based on aggrecan and collagen II mRNA, safranin O staining, Bern Score, total GAG, and GAG/DNA. For 3D-expanded BMSC-seeded scaffolds, increased aggrecan and collagen II mRNA expressions relative to controls were noted with all densities. Proteoglycan deposition was present in scaffolds seeded at 0.5–50 million BMNCs/cm3, while collagen II deposition occurred in scaffolds seeded at 10–50 million BMNCs/cm3. The highest levels of aggrecan and collagen II mRNA, Bern Score, total GAG, and GAG/DNA occurred with seeding at 50 million BMNCs/cm3. Within a collagen I scaffold, 2D- and 3D-expanded BMSCs are capable of hyaline-like chondrogenesis with optimal cell seeding densities of 5–10 million BMSCs/cm3 and 50 million BMNCs/cm3, respectively. Accordingly, these densities could be considered when seeding collagen I scaffolds in BMSC transplantation protocols.