Extracellular matrix (ECM) partially constitutes the stem cell niche. Reconstituting the ECM niche in a three-dimensional (3D) configuration will significantly enhance our understanding of how stem cells interact with and respond to the ECM niche. In this study, we aimed to reconstitute a glycosaminoglycan (GAG)-rich ECM using a microencapsulation technology, produce acellular matrix using a decellularization technique, and investigate the effect of acellular matrix on stem cell fate by repopulating the matrix with human mesenchymal stem cells (hMSCs). We demonstrated that porcine chondrocytes were able to deposit a GAG-rich ECM within the 3D collagen microsphere. All decellularization treatment groups resulted in significant removal of chondrocyte nuclei, but acellular matrix was only achieved using 2% sodium deoxycholate. Nevertheless, decellularization resulted in significant loss in GAG content in almost all treatment groups, and the 2% sodium deoxycholate group was able to preserve about 40% of the GAGs compared with the control group. We further demonstrated that hMSCs seeded onto the decellularized microspheres were able to survive and penetrate into the centre, while hMSCs seeded in the acellular matrix showed positive immunostaining against sox9, indicating that they may be differentiating toward the chondrogenic lineage without the need to supplement the chondrogenic differentiation medium.