Mesenchymal stem cells (MSCs) are being recognized as a viable cell source for cartilage repair, and there is growing evidence that mechanical signals play a critical role in the regulation of stem cell chondrogenesis and in cartilage development. In this study we investigated the effect of dynamic compressive loading on chondrogenesis, the production and distribution of cartilage specific matrix, and the hypertrophic differentiation of human MSCs encapsulated in hyaluronic acid (HA) hydrogels during long term culture. After 70 days of culture, dynamic compressive loading increased the mechanical properties, as well as the glycosaminoglycan (GAG) and collagen contents of HA hydrogel constructs in a seeding density dependent manner. The impact of loading on HA hydrogel construct properties was delayed when applied to lower density (20 million MSCs/ml) compared to higher seeding density (60 million MSCs/ml) constructs. Furthermore, loading promoted a more uniform spatial distribution of cartilage matrix in HA hydrogels with both seeding densities, leading to significantly improved mechanical properties as compared to free swelling constructs. Using a previously developed in vitro hypertrophy model, dynamic compressive loading was also shown to significantly reduce the expression of hypertrophic markers by human MSCs and to suppress the degree of calcification in MSC-seeded HA hydrogels. Findings from this study highlight the importance of mechanical loading in stem cell based therapy for cartilage repair in improving neocartilage properties and in potentially maintaining the cartilage phenotype.