The role of the chondrocyte pericellular matrix (PCM) was examined in a three‐dimensional chondrocyte culture system to determine whether retention of the native pericellular matrix could stimulate collagen and proteoglycan accumulation and also promote the formation of a mechanically functional hyaline‐like neocartilage. Porcine chondrocytes and chondrons, consisting of the chondrocyte with its intact pericellular matrix, were maintained in pellet culture for up to 12 weeks. Sulfated glycosaminoclycans and type II collagen were measured biochemically. Immunocytochemistry was used to examine collagen localization as well as cell distribution within the pellets. In addition, the equilibrium compressive moduli of developing pellets were measured to determine whether matrix deposition contributed to the mechanical stiffness of the cartilage constructs. Pellets increased in size and weight over a 6‐week period without apparent cell proliferation. Although chondrocytes quickly rebuilt a PCM rich in type VI collagen, chondron pellets accumulated significantly more proteoglycan and type II collagen than did chondrocyte pellets, indicating a greater positive effect of the native PCM. After 5 weeks in chondron pellets, matrix remodeling was evident by microscopy. Cells that had been uniformly distributed throughout the pellets began to cluster between large areas of interterritorial matrix rich in type II collagen. After 12 weeks, clusters were stacked in columns. A rapid increase in compressive strength was observed between 1 and 3 weeks in culture for both chondron and chondrocyte pellets and, by 6 weeks, both had achieved 25% of the equilibrium compressive stiffness of cartilage explants. Retention of the in vivo PCM during chondrocyte isolation promotes the formation of a mechanically functional neocartilage construct, suitable for modeling the responses of articular cartilage to chemical stimuli or mechanical compres‐ sion. © 2003 Wiley Periodicals, Inc. Biotechnol Bioeng 82: 457–464, 2003.