During random screening for chondrogenic differentiation inducers, we found that Compound-1, 4-[4-(2,3-dihydro-1,4-benzodioxin-6-yl)-1H-pyrazol-3-yl]benzene-1,3-diol, initiated chondrogenic differentiation of the chondroprogenitor cell line ATDC5. Compound-1 initiated chondrogenic differentiation of the mesenchymal stem cell line C3H10T1/2 in regions where cell aggregates formed and simultaneously inhibited adipogenic differentiation. In C3H10T1/2 cells, Compound-1 increased the expression of Sry-related high-mobility-group box transcription factors L-SOX5, SOX6, and SOX9 (SOX trio) more strongly than bone morphogenic protein (BMP)-2. cAMP-dependent protein kinase (PKA) inhibitors suppressed Compound-1-dependent L-SOX5 and SOX6 up-regulation. PKA inhibitors also suppressed the up-regulation of aggrecan mRNA induced by Compound-1, indicating that increases in L-SOX5 and SOX6 mRNA, in which the PKA pathway participates, are involved in the mechanisms behind the action of Compound-1. On the other hand, the SOX6 and aggrecan gene expression, which were up-regulated by BMP-2, were not affected by the PKA inhibitor. Compound-1 induced chondrogenic differentiation of bone marrow stromal cells and recovered cartilage matrix production by primary chondrocytes, which had been decreased by interleukin-1beta. These results show the potential of Compound-1 to be a new cartilage repair agent for inducing chondrogenic differentiation via SOX trio up-regulation.