In cartilage tissue engineering using stem cells, it is important to stimulate proliferation and control the differentiation of stem cells to specific lineages. Here we reported a combined technique for articular cartilage repair, consisting of bone marrow mesenchymal stem cells (BMMSCs) transfected with connective tissue growth factor (CTGF) gene and NaOH-treated poly(lactic-co-glycolic) acid (PLGA) scaffolds. In the present study, BMMSCs or CTGF-modified BMMSCs seeded on PLGA or NaOH-treated PLGA scaffolds were incubated in vitro and NaOH-treated PLGA significantly stimulated proliferation of BMMSCs, while CTGF gene transfer promoted chondrogenic differentiation. The effects of the composite on the repair of cartilage defects were evaluated in rabbit knee joints in vivo. Full-thickness cartilage defects (diameter: 5 mm; depth: 3 mm) were created unilaterally in the patellar groove. Defects were either left empty (n = 18) or implanted with BMMSCs/PLGA (n = 18), BMMSCs/NaOH-treated PLGA (n = 18), or CTGF-modified BMMSCs/NaOH-treated PLGA (n = 18). The defect area was examined grossly, histologically, and mechanically at 6, 12, and 24 weeks postoperatively. Implanted cells were tracked using adeno-LacZ labeling at 6 weeks after implantation. Overall, the CTGF-modified BMMSCs/NaOH-treated PLGA group showed successful hyaline-like cartilage regeneration similar to normal cartilage, which was superior to the other groups using gross examination, qualitative and quantitative histology, and mechanical assessment. The in vivo viability of the implanted cells was demonstrated by their retention for 6 weeks after implantation. These findings suggested that a combination of CTGF-modified BMMSCs and NaOH-treated PLGA may be an alternative treatment for large osteochondral defects in high-loading sites.