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The long-held axiom put forth by Hunter in 1743, that cartilage once injured is incapable of healing, has been challenged by the technique of autologous chondrocyte transplantation. This conceptual change in the way in which orthopaedists are approaching the problem of cartilage repair has spawned a myriad of new and innovative treatment modalities. This review will focus on the new techniques and directions that our facility and other investigators are exploring to restore functional articular cartilage.To show the usefulness and effectiveness of local tissue-engineered gene therapy, we transduced periosteal stem cells known to have osteochondral potential with either bone morphogenetic protein-7 (BMP-7) or sonic hedgehog (Shh) gene. These cells were cultured to increase the number of cells and then were seeded onto bioresorbable polymer scaffolds. Full-thickness osteochondral defects were created in the mid-trochlear region of eighty New Zealand White rabbits, and the implants containing the transduced cells were placed in the defects. Animals were killed at six, eight, twelve, and twenty-six weeks postoperatively and were examined macroscopically and histologically.Periosteal-derived cambium-layer cells proliferated rapidly and were easily used for transfection of both the bone morphogenic protein-7 (BMP-7) and sonic hedgehog (Shh) genes. The control defects became filled with a mixture of fibrous and fibrocartilaginous tissue. The addition of either the BMP-7 or the Shh gene significantly enhanced the quality of the repair tissue, resulting in a much smoother surface and more hyaline-appearing cartilage. There was, however, a noticeable difference in the persistence of the cartilage phase between the group that received the Shh gene and the group that received the BMP-7 gene, with the subchondral compartment in the latter group seeming to remodel with bone much faster.The results of these experiments clearly demonstrate the utility of tissue-engineering strategies in which gene therapy is used to locally influence the repair environment. It is interesting to note the relative differences in the two different gene responses with regard to skeletal development and the repair process. These differences could be related to the genes' temporal patterns in skeletal development.