Inhibiting matrix metalloproteinase (MMP) activity has been considered as a potential therapeutic treatment that may modify the outcome for osteoarthritis (OA), a disease governed by abnormalities in the balance between MMPs and their inhibitors. Due to unexpected tissue fibrosis in early-phase clinical trials with some MMP inhibitors, possible divergent effects of inhibiting MMP activity on different cells are hypothesized. Therefore, we evaluated the effects of MMP inhibition on cells relevant to cartilage tissue engineering by culturing them in vitro in poly(ethylene glycol) diacrylate hydrogels to create 3D representations of cartilage tissue while allowing for local and direct administration of inhibitors. Mesenchymal stem cells demonstrated an inhibitor concentration-dependent decrease in extracellular matrix (ECM) deposition, while normal chondrocytes were mainly affected at the highest concentration of inhibitors. In contrast, the concomitant treatment of chondrocytes from patients with OA resulted in an increase in glycosaminoglycan content only in the presence of both inhibitors and anabolic growth factors. The observed upregulation of bone markers, however, indicates a delicate balance that must be addressed to therapeutically treat OA chondrocytes to stimulate more ECM production without errant bone formation. In conclusion, this study suggests that MMPs have complex interactions in both pathobiology and homeostasis.