The origin and differentiation of cells in the repair of three-millimeter-diameter, cylindrical, full-thickness drilled defects of articular cartilage were studied histologically in New Zealand White rabbits. The animals were allowed to move freely after the operation. Three hundred and sixty-four individual defects from 122 animals were examined as long as forty-eight weeks postoperatively. In the first few days, fibrinous arcades were established across the defect, from surface edge to surface edge, and this served to orient mesenchymal cell ingrowth along the long axes. The first evidence of synthesis of a cartilage extracellular matrix, as defined by safranin-O staining, appeared at ten days. At two weeks, cartilage was present immediately beneath the surface of collagenous tissue that was rich in flattened fibrocartilaginous cells in virtually all specimens. At three weeks, the sites of almost all of the defects had a well demarcated layer of cartilage containing chondrocytes. An essentially complete repopulation of the defects occurred at six, eight, ten, and twelve weeks, with progressive differentiation of cells to chondroblasts, chondrocytes, and osteoblasts and synthesis of cartilage and bone matrices in their appropriate locations. At twenty-four weeks, both the tidemark and the compact lamellar subchondral bone plate had been re-established. The cancellous woven bone that had formed initially in the depths of the defect was replaced by lamellar, coarse cancellous bone. Autoradiography after labeling with 3H-thymidine and 3H-cytidine demonstrated that chondrocytes from the residual adjacent articular cartilage did not participate in the repopulation of the defect. The repair was mediated wholly by the proliferation and differentiation of mesenchymal cells of the marrow. Intra-articular injections of 3H-thymidine seven days after the operation clearly labeled this mesenchymal cell pool. The label, initially taken up by undifferentiated mesenchymal cells, progressively appeared in fibroblasts, osteoblasts, articular chondroblasts, and chondrocytes, indicating their origin from the primitive mesenchymal cells of the marrow. Early traces of degeneration of the cartilage matrix were seen in many defects at twelve to twenty weeks, with the prevalence and intensity of the degeneration increasing at twenty-four, thirty-six, and forty-eight weeks. Polarized light microscopy demonstrated failure of the newly synthesized repair matrix to become adherent to, and integrated with, the cartilage immediately adjacent to the drill-hole, even when light microscopy had shown apparent continuity of the tissue. In many instances, a clear gap was seen between repair and residual cartilage.(ABSTRACT TRUNCATED AT 400 WORDS)