The present investigation aims to explore the role of cell-scaffold interactions and whole cell compression in chondrocyte mechanotransduction using encapsulating poly(ethylene glycol) (PEG) hydrogel scaffolds and primary bovine chondrocytes. Scaffolds made from PEG hydrogels with immobilized fibrinogen molecules were seeded with chondrocytes and subjected to 15% dynamic compressive strain at 1-Hz frequency. Dynamic strain stimulation resulted in a 37% increase in the levels of sulfated glycosaminoglycan (sGAG) after 2 weeks of stimulation, when compared to static controls. Comparing results of the PEG-fibrinogen scaffolds with their respective PEG control group did not show significant differences between the two, even following 2 weeks of dynamic mechanical stimulation. Accordingly, these findings indicate that while cell deformations cause metabolic changes in chondrocytes seeded in PEG hydrogels, it is difficult to ascertain the role of matrix bioactivity in enhancing chondrocyte mechanotransduction in encapsulating scaffolds subjected to physical deformations. This study shows how interactions between mechanical stimulation and scaffold composition are evaluated using an experimental approach and customized biomaterial scaffolds.