Tissue engineering refers to the assembly of biomaterials, cells and signaling molecules to develop functional tissues based on strategies derived from developmental processes. Cells play a crucial role, in that they can secrete a library of molecules, not entirely characterized in the laboratory, and yet provide repeatable results during in vitro experiments. Under conditions of co-culture with mesenchymal stem cells, the underlying biology of chondrocytes can elucidate the signal expression during the early bone development process called endochondral ossification. This interaction is tightly regulated in chondrocytes and results in the recruitment and differentiation of mesenchymal stem cells (MSCs) into osteoblasts. We executed a co-culture system, to observe the potential of alginate encapsulated bovine articular cartilage chondrocytes to induce osteogenic differentiation of bovine bone marrow stromal cells and to observe the interaction on a global scale by making use of the microarray platform. We identified certain genes expressed by chondrocytes that show substantial activity in co-culture systems such as versican (VCAN), secreted frizzled related protein 1 (SFRP1), matrix metallopeptidase 13 (MMP13), extracellular matrix protein 1 ( ECM1) and collagen type 1 ( Col1A1, Col1A2).