We developed alginate beads loaded with transforming growth $factor-{eta}_{1}(TGF-{eta}_{1})$ to examine the possible application of the scaffold and cytokine carrier in tissue engineering. In this study, bone marrow stromal cells (BMSCs) and $TGF{eta}_{1}$ were uniformly encapsulated in the alginate beads and then cultured in vitro. The cell morphology and shape of the alginate beads were observed using inverted microscope, scanning electron microscope (SEM), histological staining and RT-PCR to confirm chondrogenic differentiation. The amount of the $TGF{eta}_{1}$ released from the $TGF-{eta}_{1}$ loaded alginate beads was analyzed for 28 days in vitro in a phosphate buffered saline (pH 7.4) at $37^{circ}C$. We observed the release profile of $TGF-{eta}_{1}$ from $TGF-{eta}_{1}$ loaded alginate beads with a sustained release pattern for 35 days. Microscopic observation showed the open cell pore structure and abundant cells with a round morphology in the alginate beads. In addition, histology and RT-PCR results revealed the evidence of chondrogenic differentiation in the beads. In conclusion, these results confirmed that $TGF-{eta}_{1}$ loaded alginate beads provide excellent conditions for chondrogenic differentiation.