Cell laden biomaterials are archetypically seeded with individual cells and steered into the desired behavior using exogenous stimuli to control growth and differentiation. In contrast, direct cell-cell contact is instructive and even essential for natural tissue formation. Namely, microaggregation and condensation of mesenchymal progenitor cells triggers chondrogenesis and thereby drives limb formation. Yet a biomimetic strategy translating this approach into a cell laden biomaterial-based therapy has remained largely unexplored. Here, we integrate the microenvironment of cellular condensation into biomaterials by encapsulating microaggregates of a hundred human periosteumderived stem cells. This resulted in decreased stemness-related markers, up regulation of chondrogenic genes and improved in vivo cartilage tissue formation, as compared to single cell seeded biomaterials. Importantly, even in the absence of exogenous growth factors, the microaggregate laden hydrogels outperformed conventional single cell laden hydrogels containing supraphysiological levels of the chondrogenic growth factor TGFB. Overall, the bioinspired seeding strategy described herein represents an efficient and growth factor-free approach to efficiently steer cell fate and drive tissue formation for biomaterial-based tissue engineering strategies.