Cartilage is a tissue with limited self-healing potential. Hence, cartilage defects require surgical attention to prevent or postpone the development of osteoarthritis. For cell-based cartilage repair strategies, in particular autologous chondrocyte implantation, articular chondrocytes are isolated from cartilage and expanded in vitro to increase the number of cells required for therapy. During expansion, the cells lose the competence to autonomously form a cartilage-like tissue, that is in the absence of exogenously added chondrogenic growth factors, such as TGF-βs. We hypothesized that signaling elicited by autocrine and/or paracrine TGF-β is essential for the formation of cartilage-like tissue and that alterations within the TGF-β signaling pathway during expansion interfere with this process. Primary bovine articular chondrocytes were harvested and expanded in monolayer culture up to passage six and the formation of cartilage tissue was investigated in high density pellet cultures grown for three weeks. Chondrocytes expanded for up to three passages maintained the potential for autonomous cartilage-like tissue formation. After three passages, however, exogenous TGF-β1 was required to induce the formation of cartilage-like tissue. When TGF-β signaling was blocked by inhibiting the TGF-β receptor 1 kinase, the autonomous formation of cartilage-like tissue was abrogated. At the initiation of pellet culture, chondrocytes from passage three and later showed levels of transcripts coding for TGF-β receptors 1 and 2 and TGF-β2 to be three-, five- and five-fold decreased, respectively, as compared to primary chondrocytes. In conclusion, the autonomous formation of cartilage-like tissue by expanded chondrocytes is dependent on signaling induced by autocrine and/or paracrine TGF-β. We propose that a decrease in the expression of the chondrogenic growth factor TGF-β2 and of the TGF-β receptors in expanded chondrocytes accounts for a decrease in the activity of the TGF-β signaling pathway and hence for the loss of the potential for autonomous cartilage-like tissue formation.