Cartilage damage, particularly in the knee joint, presents a significant challenge in regenerative medicine due to its limited capacity for self-repair. Conventional treatments like microfracture surgery, autologous chondrocyte implantation (ACI), and osteochondral allografts often fall short, particularly in cases of larger defects or degenerative conditions. This has led to a growing interest in tissue engineering approaches that utilize biomaterial scaffolds to support cartilage regeneration. Among the many materials explored, chitosan-a naturally derived polysaccharide-has gained attention for its biocompatibility, biodegradability, and structural resemblance to the extracellular matrix (ECM) of cartilage. Recent advances in scaffold design have focused on modifying chitosan to improve its mechanical properties and enhance its biological performance. These modifications include chemical crosslinking, the incorporation of bioactive molecules, and the development of composite formulations. Such enhancements have allowed chitosan-based scaffolds to better support mesenchymal stem cell (MSC) differentiation into chondrocytes, paving the way for improved regenerative strategies. This review explores the latest progress in chitosan scaffold fabrication, preclinical findings, and the transition toward clinical applications. It also discusses the challenges that need to be addressed, such as mechanical stability, degradation rates, and the successful translation of research into viable therapeutic solutions.