Objective: The aim of this study was to evaluate the differentiation potential of two populations of muscle-derived cells (CD56- and CD56+) towards chondrogenic phenotype in alginate beads culture and to compare the effect of transforming growth factor beta 1 (TGFbeta1) on the differentiation process in these populations. Methods: Muscle CD56- and CD56+ cells were cultured in alginate beads, in a chondrogenic medium, containing or not TGFbeta1 (10 ng/ml). Cultures were maintained for 3, 7, 14 or 21 days in a humidified culture incubator. At harvest, one culture of each set was fixed for alcian blue staining and aggrecan detection. The steady-state level of matrix macromolecules mRNA was assessed by real-time polymerase chain reaction (PCR). Protein detection was performed by western-blot analysis. The binding activity of nuclear extracts to Cbfa1 DNA sequence was also evaluated by electrophoretic mobility shift assays (EMSA). Results: Chondrogenic differentiation of both CD56+ and CD56- muscle-derived cells was improved in alginate scaffold, even without growth factor, as suggested by increased chondrogenesis markers expression during the culture. Furthermore, TGFbeta1 enhanced the differentiation process and allowed to maintain a high expression of markers of mature chondrocytes. Of importance, the combination of alginate and TGFbeta1 treatment resulted in a further down-regulation of collagen type I and type X, as well as Cbfa1 both expression and binding activity. Conclusions: Thus, alginate scaffold and chondrogenic medium are sufficient to lead both populations CD56+ and CD56- towards chondrogenic differentiation. Moreover, TGFbeta1 enhances this process and allows to maintain the chondrogenic phenotype by inhibiting terminal differentiation, particularly for CD56- cells.