Many fabrication methods for scaffolds made with biodegradable polymers and hydrogels have shown promise for tissue engineering applications. Both possess their own benefits and disadvantages. However, by utilizing both, the advantages of each can be combined into a single hybrid scaffold. By increasing the reaction concentration of a modified synthesis protocol previously published, the lower critical solution temperature (LCST) of a biodegradable, thermos-sensitive hydrogel, poly (ethylene glycol)-poly (N-isopropylacrylamide) (PEG-PNIPAAm), was optimized to its lowest possible concentration for gelation (5 wt. %). The resulting PEG-PNIPAAm was blended with a hydrophobic, biodegradable polymer, poly (ε-caprolactone) (PCL), and electrospun into a 3-dimensional (3D), electrospun hybrid scaffold. The blending ratio of PEG-PNIPAAm:PCL (13:9), scaffold porosity (90%) and fiber diameter (11 μm) where optimized for uniform cell seeding and cell encapsulation within the dissolved hydrogel. During cell seeding, PEG-PNIPAAm dissolved into the media solution, surrounding seeded cells and filling the scaffolds pore volume without the need of a mold. When incubated at 37 °C, the seeded cells are encapsulated within the PEG-PNIPAAm hydrogel. The hydrophobic PCL network remains as a structural support, increasing the compressive, elastic and viscoelastic properties of PEG-PNIPAAm. Including PEG-PNIPAAm within the PCL scaffold, also resulted in the improvement of mechanical characteristics over PCL control scaffolds. Culturing mesenchymal stem cells (MSCs) within hybrid scaffolds for two weeks under chondrogenic conditions increased chondrogenic gene expression and proteoglycan deposition compared to PCL controls with a similar scaffold porosity and fiber diameters. The addition of PEG-PNIPAAm within a 3D structured, PCL network produces a hybrid scaffold with the potential for a variety of tissue engineering applications.