Osteoarthritis results in major lesions of the articular cartilage and abnormalities in the underlying subchondral bone. In the simplest case of trauma-induced lesions, regeneration/repair of the affected tissue could restore normal function and long-term use without recurrences. We propose to develop such a regeneration/repair technology by delivering adequate quantities of reparative cells to the site of a full-thickness articular defect in rabbits. We hypothesize that such reparative cells reside in the periosteum and can be isolated, mitotically expanded in culture and delivered to a full-thickness defect. Furthermore, we assume that the complex chemistry of the implantation site will provide the local cueing necessary to allow proper differentiation of the tissues, restoration of normal morphology and functional integration of reparative and surrounding host tissue. The proposed experiments are based on the thesis that a multipotential skeletal progenitor cell, referred to as a Mesenchymal Stem Cell, can be obtained from periosteum and manipulated to provide sufficient quantities of autologous cells to effect appropriate repair/regeneration. The success of these experimental methods will be judged by use of morphological, biochemical/molecular and biochemical testing criteria. Success involves regeneration of both cartilage and bone with the appropriate molecular and mechanical properties which results in the long- term stability/functionality of the reparative tissues.