The therapeutic application of human induced pluripotent stem cells (hiPSCs) for cartilage regeneration is largely hindered by the low yield of chondrocytes accompanied by unpredictable and heterogeneous off-target differentiation of cells during chondrogenesis. Here, we combine bulk RNA sequencing, single cell RNA sequencing, and bioinformatic analyses, including weighted gene co-expression analysis (WGCNA), to investigate the gene regulatory networks regulating hiPSC differentiation under chondrogenic conditions. We identify specific WNTs and MITF as hub genes governing the generation of off-target differentiation into neural cells and melanocytes during hiPSC chondrogenesis. With heterocellular signaling models, we further show that WNT signaling produced by off-target cells is responsible for inducing chondrocyte hypertrophy. By targeting WNTs and MITF, we eliminate these cell lineages, significantly enhancing the yield and homogeneity of hiPSC-derived chondrocytes. Collectively, our findings identify the trajectories and molecular mechanisms governing cell fate decision in hiPSC chondrogenesis, as well as dynamic transcriptome profiles orchestrating chondrocyte proliferation and differentiation.