Inflammatory cytokines present in the milieu of the fracture site are important modulators of bone healing. Here we investigated the effects of interleukin-1β (IL-1β) on the main events of endochondral bone formation by human bone marrow mesenchymal stromal cells (BM-MSC), namely cell proliferation, differentiation and maturation/remodelling of the resulting hypertrophic cartilage. Low doses of IL-1β(50 pg/mL) enhanced colony-forming units-fibroblastic (CFU-f) and -osteoblastic (CFU-o) number (up to 1.5-fold) and size (1.2-fold) in the absence of further supplements and glycosaminoglycan accumulation (1.4-fold) upon BM-MSC chondrogenic induction. In osteogenically cultured BM-MSC, IL-1β enhanced calcium deposition (62.2-fold) and BMP-2 mRNA expression by differential activation of NF-κB and ERK signalling. IL-1β-treatment of BM-MSC generated cartilage resulted in higher production of MMP-13 (14.0-fold)in vitro, mirrored by an increased accumulation of the cryptic cleaved fragment of aggrecan, and more efficient cartilage remodelling/resorption after 5 weeksin vivo(i.e., more TRAP positive cells and bone marrow, less cartilaginous areas), resulting in the formation of mature bone and bone marrow after 12 weeks. In conclusion, IL-1β finely modulates early and late events of the endochondral bone formation by BM-MSC. Controlling the inflammatory environment could enhance the success of therapeutic approaches for the treatment of fractures by resident MSC and as well as improve the engineering of implantable tissues.