Objectives: This article addresses the interaction of transforming growth factor β1 (TGF‐β1) and bone morphogenic protein 2 (BMP‐2) during osteo‐chondrogenic differentiation of adipose‐derived adult stem cells (ASC). TGF‐β1 was expected to modulate the BMP‐2‐induced effects through transcriptional regulation of Dlx‐5, Msx‐2 and Runx‐2. Materials and Methods: Encapsulated ASC were cultured for 14 days in medium containing TGF‐β1 and/or BMP‐2. mRNA expression of the extracellular matrix molecules col2a1, cartilage oligomeric matrix protein, col10a1, alkaline phosphatase (AP) and transcription factors Msx‐2, Dlx‐5 and Runx‐2 was analysed. Release of glycosaminoglycans, collagen types II and X into the extracellular matrix was demonstrated. Results: BMP‐2 and TGF‐β1 induced a chondrogenic phenotype in ASC. Combined growth factor treatment had a synergistic effect on col10a1 and an additive effect on col2a1 mRNA expression. Synthesis of glycosaminoglycans was enhanced by combined growth factor treatment. Addition of TGF‐β1 inhibited BMP‐2 induced AP expression and activity and both proteins promoted chondrogenic maturation. Conclusions: Prevention of BMP‐2‐induced osteogenic transdifferentiation by TGF‐β1 seemed not to be mediated by transcriptional regulation of Dlx‐5. Due to these findings, simultaneous stimulation of ASC with BMP‐2 and TGF‐β1 seemed to be beneficial for complete differentiation of ASC into chondrocytes.