A poly(ethylene glycol) (PEG)-based hydrogel was used as a scaffold for chondrocyte culture. Branched PEG-vinylsulfone macromers were end-linked with thiol-bearing matrix metalloproteinase (MMP)-sensitive peptides (GCRDGPQGIWGQDRCG) to form a three-dimensional network in situ under physiologic conditions. Both four- and eight-armed PEG macromer building blocks were examined. Increasing the number of PEG arms increased the elastic modulus of the hydrogels from 4.5 to 13.5 kPa. PEG-dithiol was used to prepare hydrogels that were not sensitive to degradation by cell-derived MMPs. Primary bovine calf chondrocytes were cultured in both MMP-sensitive and MMP-insensitive hydrogels, formed from either four- or eight-armed PEG. Most (>90%) of the cells inside the gels were viable after 1 month of culture and formed cell clusters. Gel matrices with lower elastic modulus and sensitivity to MMP-based matrix remodeling demonstrated larger clusters and more diffuse, less cell surface-constrained cell-derived matrix in the chondron, as determined by light and electron microscopy. Gene expression experiments by real-time RT-PCR showed that the expression of type II collagen and aggrecan was increased in the MMP-sensitive hydrogels, whereas the expression level of MMP-13 was increased in the MMP-insensitive hydrogels. These results indicate that cellular activity can be modulated by the composition of the hydrogel. This study represents one of the first examples of chondrocyte culture in a bioactive synthetic material that can be remodeled by cellular protease activity.