An implant for articular cartilage repair includes (1) a three-dimensional body formed of cancellous bone having a demineralized section that contains bone morphogenetic proteins (BMP's) that are released by the demineralization but retained in the body, and (2) a cartilage layer formed on a surface of the demineralized section. The cartilage layer is formed by a method including the steps of (a) isolating chondrocytes from articular cartilage of a donor; (b) cultivating the isolated chondrocytes in a medium; (c) suspending the cultivated chondrocytes in agarose; (d) adding the cultivated chondrocytes to the demineralized section of the body, whereby the cultivated chondrocytes are stimulated by the BMP's retained in the body; and (e) incubating the cultivated chondrocytes to form a plurality of layers of chondrocytes on the demineralized section, wherein the plurality of layers of chondrocytes forms the cartilage layer.