The cellular microenvironment plays a crucial role in directing proliferation and differentiation of stem cells. Cells interact with their microenvironment via integrins that recognize certain peptide sequences of extracellular matrix proteins. This receptor-ligand binding has profound impact on cell fate. Interactions of human bone marrow mesenchymal stem cells (hMSCs) with the triple helical collagen mimetic, GPC(GPP)5-GFOGER-(GPP)5GPC-NH2, and the fibronectin adhesion peptide, RGD, were studied in degradable or nondegradable polyethylene glycol (PEG) gels formed by Michael-type addition chemistry. Proliferation, cytoskeletal morphology, and chondrogenic differentiation of encapsulated hMSCs were evaluated. The hMSCs adopted a highly spread morphology within the GFOGER-modified gels, whereas RGD induced a star-like spreading of the cells. hMSCs within GFOGER-modified degradable gels had a high proliferation rate compared with cells in peptide-free gels (p=0.017). Gene expression of type II collagen was highest in GFOGER-modified degradable gels after 21 days. Peptide incorporation increased GAG production in degradable gels after 7 and 21 days and GFOGER-modified degradable hydrogels had on average the highest GAG content, a finding that was confirmed by Alcian blue staining. In conclusion, the GFOGER peptide enhances proliferation in degradable PEG gels and provides a better chondrogenic microenvironment compared with the RGD peptide.