Osteoarthritis (OA) is one of the most significant health problems of today’s time. Three  dimensional culture models area major tool used by researchers to study cartilage degeneration associated with OA. The objective was to improve upon current 3D culture models. The hypothesis was that atelocollagen, when added to a hyaluronan matrix, enhances the chondrogenic development of bone-marrow derived mesenchymal stem cells (MSC). Additionally, these 3D cultures can be used to model inflammation-induced cartilage degradation. The experiment was organized into two phases. Phase I focused on the development of cartilage through the 3D culture of MSCs and Phase II, focused on the inflammation-induced degradation of the cultures. Conditioned mediums from naive and inflamed macrophages were added to the cultures after development and they were eventually processed for the purposes of histology and gene expression analysis. During Phase I, atelocollagen added to the hyaluronan matrix, significantly increased the gene expression of COLL II and decreased that of MMP13 when compared to hyaluronan alone, indicating improved matrix formation. This was reflected in histological analyses, as both the change in interstitial matrix and territorial matrix grade were greater in the cultures with atelocollagen. After inflammation exposure, there was a significant decrease in COLLII expression with a concomitant increase in MMP13 expression in both cultures indicating inflammation-induced degradation. Therefore, this new model of developing cartilage from MSC with hyaluronan and atelocollagen creates an articular cartilage model that acts like real cartilage in both healthy and damaged states.