Objective To investigate the effect of “two-phase” tissue engineered cartilage constructed by autologous marrow mesenchymal stem cells(MSCs) and allogeneic bone matrix gelatin(BMG) in repairing articular cartilage defects. Methods Thirty-twoNew Zealand white rabbits were involved in the experiment. “Two-phase” allogeneic BMG scaffold (one side of porous cancellous bone and the other side of cortical bone; 3 mm both in diameter and in thickness) was prepared from iliac bone and limb bone of 5 rabbits by sequentially chemical method. The MSCs wereseparated from 18 New Zealand white rabbits and induced to express chondrocyticphenotype. The chondrocyte precursor cells were seeded onto “two-phase” allogeneic BMG to construct tissue engineering cartilage. Masson’s trichrome staining, PAS staining and scanning electronic microscopic observation were carried out at 1, 3 and 5 weeks. The defects of full thickness articular cartilage(3 mm both in diameter and in depth) were made at both sides of femoral medial condyles in 27 rabbits(including 18 of separated MSCs and the remaining 9). The defects were repaired with the tissue engineered cartilage at the right side (group A, n=18), with BMG at the left side(group B, n=18), and without any implant at both sides in the remaining 9 rabbits as a control( group C, n=18). After 1, 3 and6 months, the 6 specimens of femoral condyles were harvested in 3 groups, respectively. Gross observation, Masson’s trichrome and Alcian blue staining, modified Wakitani scoring and in situ hybridization of collagen type Ⅱ were carried out to assess the repair efficacy of tissue engineered cartilage. Results The “two-phase” BMG consisted of the dense cortical part and the loose cancellous part. In cancellous part, the pore size ranged 100-800 μm, in which the chondrocyte precursor cells being induced from MSCs proliferated and formed the cell-rich cartilaginous part of tissue engineered cartilage. In cortical part, the pore size ranged 10-40 μm, on which the cells arranged in a layer and formed the hard part of subchondral bone. After 1 month of transplantation, the cartilage and subchondral bone were regenerated in group A; during observation, the regenerated cartilage graduallythinned, but defect was repaired and the structure of the articular surface ansubchondral bone was in integrity. In groups B and C, defects were not repaired, the surrounding cartilage of defect was abrased. According to the modified Wakitani scoring, the indexes in group A were significantly higher than those in group B and C(Plt;0.01) except the thickness of cartilage at 6 months. The positive cell rate of in situ hybridization for collagen type Ⅱ in group A was also higher than those in groups B and C(Plt;0.01). Conclusion “Two-phase” allogeneic BMG is a prospective scaffold for tissue engineered cartilage,which combines with autologous chondrocyte precursor cells induced from MSCs toconstruct the tissue engineering cartilage. The tissue engineered cartilage can repair defects of articular cartilage and subchondral bone.