As the potential range of stem cell applications in tissue engineering continues to grow, the appropriate scaffolding choice is necessary to create tightly defined artificial microenvironments for each target organ. These microenvironments determine stem cell fate via control over differentiation. In this study we examined the specific effects of scaffold stiffness on embryonic mesenchymal progenitor cell behavior. Mechanically distinct scaffolds having identical microstructures and surface chemistries were produced utilizing core-shell electrospinning. The modulus of core-shell poly(ether sulfone)-poly(ε-caprolactone) (PES-PCL) fibers (30.6 MPa) was more than four times that of pure PCL (7.1 MPa). The results for chondrogenic and osteogenic differentiation of progenitor cells on each scaffold indicate that the lower modulus PCL fibers provided more appropriate microenvironments for chondrogenesis, evident by a marked up-regulation of chondrocytic Sox9, collagen type 2, and aggrecan gene expression and chondrocyte-specific extracellular matrix glycosaminoglycan production. In contrast, the stiffer core-shell PES-PCL fibers supported enhanced osteogenesis by promoting osteogenic Runx2, alkaline phosphatase, and osteocalcin gene expression, as well as alkaline phosphatase activity. The findings demonstrate that the microstructural stiffness/modules of a scaffold and the pliability of individual fibers may play a critical role in controlling stem cell differentiation. Regulation of cytoskeletal organization may occur via a "dynamic scaffold" leading to the subsequent intracellular signaling events that control differentiation-specific gene expression.