Tissue engineering of articular cartilage is focused on generating the microenvironment, so as to restore its complex biomechanical and biochemical properties. We developed a novel Chitosan-Agarose (CHAG) scaffold resembling the properties of native cartilage extracellular matrix that aids in-vitro cartilage formation. Human Wharton’s Jelly Mesenchymal Stem Cells (HWJ-MSCs) were seeded on CHAG scaffolds, cultured in Chondrogenic medium with supplementation of growth factors (BMP-2, TGF-β3). Dynamic compression loading was applied to mimic the microenvironment of native cartilage. The HWJ-MSCs seeded CHAG scaffolds have good cell attachment, infiltration and chondrogenesis with neo extracellular matrix synthesis. CHAG scaffolds seeded with HWJ-MSCs cultured in Chondrogenic media supplemented with both BMP-2 and TGF-β3 and simultaneous dynamic compression loading produced 15.26±2.48 µg GAG/µg DNA. Our results highlighted the potential strategy of using the combination of dynamic compression loading and CHAG scaffold in creating a functional, tissue engineered construct for articular cartilage.