Human induced pluripotent stem cells (iPSCs) have emerged as a promising alternative to bone-marrow derived mesenchymal stem/stromal cells for cartilage tissue engineering. However, the effect of biochemical and mechanical cues on iPSC chondrogenesis remains understudied. This study evaluated chondrogenesis of induced pluripotent mesenchymal progenitor cells (iPS-MPs) encapsulated in a cartilage-mimetic hydrogel under different culture conditions: free swelling versus dynamic compressive loading and different growth factors (TGFβ3 and/or BMP2). Human iPSCs were differentiated into iPS-MPs and chondrogenesis was evaluated by gene expression (qPCR) and protein expression (immunohistochemistry) after three weeks. In pellet culture, both TGFβ3 and BMP2 were required to promote chondrogenesis. However, the hydrogel in growth factor-free conditions promoted chondrogenesis, but rapidly progressed to hypertrophy. Dynamic loading in growth factor-free conditions supported chondrogenesis, but delayed the transition to hypertrophy. Findings were similar with TGFβ3, BMP2, and TGFβ3 + BMP2. Dynamic loading with TGFβ3, regardless of BMP2, was the only condition that promoted a stable chondrogenic phenotype (aggrecan + collagen II) accompanied by collagen X down-regulation. Positive TGFβRI expression with load-enhanced Smad2/3 signaling and low SMAD1/5/8 signaling was observed. In summary, this study reports a promising cartilage-mimetic hydrogel for iPS-MPs that when combined with appropriate biochemical and mechanical cues induces a stable chondrogenic phenotype.