Increasing evidence indicates that the secretome of mesenchymal stem cells (MSCs) has therapeutic potential for the treatment of various diseases, including cartilage disorders. However, the paracrine mechanisms underlying cartilage repair by MSCs are poorly understood. Here, we show that human umbilical cord blood-derived MSCs (hUCB-MSCs) promoted differentiation of chondroprogenitor cells by paracrine action. This paracrine effect of hUCB-MSCs on chondroprogenitor cells was increased by treatment with synovial fluid (SF) obtained from osteoarthritis (OA) patients but was decreased by SF of fracture patients, compared to that of an untreated group. To identify paracrine factors underlying the chondrogenic effect of hUCB-MSCs, the secretomes of hUCB-MSCs stimulated by OA SF or fracture SF were analyzed using a biotin label-based antibody array. Among the proteins increased in response to these two kinds of SF, thrombospondin-2 (TSP-2) was specifically increased in only OA SF-treated hUCB-MSCs. In order to determine the role of TSP-2, exogenous TSP-2 was added to a micromass culture of chondroprogenitor cells. We found that TSP-2 had chondrogenic effects on chondroprogenitor cells via PKCα, ERK, p38/MAPK, and Notch signaling pathways. Knockdown of TSP-2 expression on hUCB-MSCs using small interfering RNA abolished the chondrogenic effects of hUCB-MSCs on chondroprogenitor cells. In parallel with in vitro analysis, the cartilage regenerating effect of hUCB-MSCs and TSP-2 was also demonstrated using a rabbit full-thickness osteochondral-defect model. Our findings suggested that hUCB-MSCs can stimulate the differentiation of locally presented endogenous chondroprogenitor cells by TSP-2, which finally leads to cartilage regeneration.