A process for exposing live cells to a soluble bone protein and transferring the cells into appropriate skeletal sites to initiate or enhance local chondrogenesis or osteogenesis. Isogenic fibroblasts are exposed in vitro to a soluble bone protein capable of stimulating in vitro and/or in vivo a chondrogenic response. The fibroblasts are then transferred in vivo in a manner effective to prevent diffusion away from the implantation site so that the desired chondro/osteogenesis reaction can proceed. Delivery systems include: combining the activated fibroblasts with a biodegradable matrix; suspending the activated fibroblasts in a solution suitable for intra-articular injection; and attaching the fibroblasts to allografts and prosthetic devices.