Osteoarthritis is the leading cause of disability in the US. Consequently, there is a pressing need for restoring the structural and functional properties of diseased articular cartilage. Yet the search for the right combination of proper target cells and growth factors for cartilage regeneration remains challenging. In this study, we first tested the intrinsic chondrogenic differentiation ability of human perivascular stem cells (hPSCs), a novel source of mesenchymal stem cells (MSCs) isolated by fluorescence-activated cell sorting (FACS) from human adipose tissue. A putative prochondrogenic growth factor, NEL-like molecule-1 (NELL-1), was added to the hPSC pellets to upregulate gene expression of chondrogenic markers, including AGGRECAN, COLLAGEN II, and COMP. Furthermore, the addition of NELL-1 to a transforming growth factor beta 3 (TGF-β3) + bone morphogenetic protein-6 (BMP-6) "cocktail" resulted in the best combinatorial stimulation in accelerating the chondrogenic differentiation of hPSCs, as evidenced by increased gene and protein expression of chondrogenic markers in a shortened induction time without elevating expression of hypertrophic, fibrotic, and osteogenic markers. Mechanistically, this acceleration rendered by NELL-1 may be partially attributed to NELL-1's upregulation of BMP receptors and TGF-β receptor type I in hPSCs for increased responsiveness to BMPs + TGF-βs. In conclusion, lipoaspirate-derived hPSCs present a novel and abundant cell source of MSCs for cartilage regeneration, and the combinatorial application of NELL-1, TGF-β3, and BMP-6 with hPSCs may remarkably enhance and accelerate cartilage repair.