Osteochondral defects (OCD) pose a significant clinical challenge due to the limited self-repair capacity of cartilage, leading to pain, joint dysfunction, and progression to osteoarthritis. Cellular implantations of adult mesenchymal stem cells (MSCs) enhanced with treatment of factors, such as small molecule Kartogenin (KGN) to promote chondrogenic differentiation, are promising but these cells often encounter hypertrophy during differentiation, compromising long-term stability. Induced pluripotent stem cell-derived MSCs (iMSCs) offer greater proliferative and differentiation capacity than MSCs and may provide a superior source of cells for cartilage repair. We hypothesized that treatment of iMSCs with TGFβ3 and KGN would enhance chondrogenic differentiation and that implanting these pellets into a rat OCD model would promote de novo cartilage regeneration and reduce pain behavior. We pellet cultured iMSCs derived from articular chondrocytes and treated with various conditions of TGFβ3 and KGN. We then assessed the in vivo performance of the pellets using a trochlear osteochondral defect in male Lewis rats. Co-treatment of iMSC pellets with TGFβ3 and KGN showed more pronounced chondrogenic differentiation than sequential treatment and exhibited stronger expression of chondrogenic genes. Implantation of the TGFβ3/KGN-treated iMSC pellets into OCD resulted in modest repair, as observed via gross morphology, effectively prevented the onset of joint hyperalgesia, and helped to maintain normal gait out to 12 weeks post-implantation compared to untreated OCD rats. Our study highlights the potential of KGN to enhance iMSC pellet chondrogenesis, offering a scaffold-free, cell-based therapy that could simplify clinical translation and improve outcomes for patients with cartilage injuries.