Self-assembling peptide hydrogels were modified to deliver transforming growth factor β1 (TGF-β1) to encapsulated bone-marrow-derived stromal cells (BMSCs) for cartilage tissue engineering applications using two different approaches: (i) biotin-streptavidin tethering; (ii) adsorption to the peptide scaffold. Initial studies to determine the duration of TGF-β1 medium supplementation necessary to stimulate chondrogenesis showed that 4 days of transient soluble TGF-β1 to newborn bovine BMSCs resulted in 10-fold higher proteoglycan accumulation than TGF-β1-free culture after 3 weeks. Subsequently, BMSC-seeded peptide hydrogels with either tethered TGF-β1 (Teth-TGF) or adsorbed TGF-β1 (Ads-TGF) were cultured in the TGF-β1-free medium, and chondrogenesis was compared to that for BMSCs encapsulated in unmodified peptide hydrogels, both with and without soluble TGF-β1 medium supplementation. Ads-TGF peptide hydrogels stimulated chondrogenesis of BMSCs as demonstrated by cell proliferation and cartilage-like extracellular matrix accumulation, whereas Teth-TGF did not stimulate chondrogenesis. In parallel experiments, TGF-β1 adsorbed to agarose hydrogels stimulated comparable chondrogenesis. Full-length aggrecan was produced by BMSCs in response to Ads-TGF in both peptide and agarose hydrogels, whereas medium-delivered TGF-β1 stimulated catabolic aggrecan cleavage product formation in agarose but not peptide scaffolds. Smad2/3 was transiently phosphorylated in response to Ads-TGF but not Teth-TGF, whereas medium-delivered TGF-β1 produced sustained signaling, suggesting that dose and signal duration are potentially important for minimizing aggrecan cleavage product formation. Robustness of this technology for use in multiple species and ages was demonstrated by effective chondrogenic stimulation of adult equine BMSCs, an important translational model used before the initiation of human clinical studies.