In this study, we developed an injectable in situ forming hydrogel/microparticle system consisting of two drugs, melatonin and methylprednisolone, to investigate the capability of the system for chondrogenesis in vitro and in vivo. The chemical, mechanical, and rheological properties of the hydrogel/microparticle were investigated. For in vitro evaluation, the adipose-derived stem cells might be mixed with hydrogel/microparticles, then cellular viability was analyzed by acridine orange/propidium iodide and 4′,6-diamidino-2-phenylindole staining and also dimethylmethylene blue assay were conducted to find the amount of proteoglycan. The real-time polymerase chain reaction for aggrecan, sex-determining region Y-Box 9, collagen I (COL1), and COL2 gene expression was performed after 14 and 21 days. For evaluation of cartilage regeneration, the samples were implanted in rabbit knees with cartilaginous experimental defects. Defects were created in both knees of three groups of rabbits. Group 1 was the control with no injection, and Groups 2 and 3 were loaded with hydrogel/cell and hydrogel/microparticle/cell; respectively. Then, after 3 and 6 months, histological evaluations of the defected sites were carried out. The amount of glycosaminoglycans after 14 and 21 days increased significantly in hydrogels/microparticles loaded with cells. The expression of marker genes was also significant in hydrogels/microparticles loaded with cells. According to histology analysis, the hydrogels/microparticles loaded with cells showed the best cartilage regeneration. Overall, our study revealed that the developed injectable hydrogel/microparticle can be used for cartilage regeneration.