A method and composition are provided for inducing or enhancing chondrogenesis in vivo or in vitro. The method is performed by exposing the cells in vitro or in vivo to an extracellular matrix comprising of type I collagen, type II collagen or a mixture of type I collagen or type II collagen and hyaluronate and further containing BMP-4 or a combination of BMP-4 and GDF-5.