We investigated substrate dependent paracrine signaling between subpopulations of bone marrow stromal cells (BMSCs) that may affect the formation, or perhaps malformation, of the regenerating tendon to bone enthesis. Polyacrylamide substrates approximating the elastic modulus of tendon granulation tissue and the osteoid of healing bone (10-90 kPa) were functionalized with whole length fibronectin (Fn), type-I collagen (Col), or a mixed ligand solution (Fn/Col), and BMSCs were cultured in growth media alone or media supplemented with soluble Col or Fn. More rigid substrates with a narrow mechanical gradient (70-90 kPa) robustly induced osteogenic cell differentiation when functionalized with either Col or Fn. On broader mechanical gradient substrates (with a linear elastic modulus gradient from 10-90 kPa), cell differentiation was markedly osteogenic on subregions of Fn functionalized substrates above 20 kPa, but osteogenic activity was inhibited on all subregions of Col substrates. Osteogenic behavior was not observed when cells were cultured on Fn substrates if Col was present either in the media or on the substrate (Fn/Col). Tenogenic differentiation markers were observed only on Col substrates with moderate rigidity (∼30-50 kPa). Tenogenic differentiation was unaltered by soluble or substrate bound Fn. Co-culture of narrow gradient subsections revealed that any inclusion of tenogenic substrates (30-50 kPa, Col), caused otherwise osteogenic substrates to not develop markers of osteogenic differentiation, while increasing cell proliferation. These apparently paracrine effects could be mediated by bone morphogenetic protein-2 (BMP-2), as first confirmed by gene-level expression of BMP-2 and the transcription factor Smad8, and verified by BMP-2 media supplementation at levels similar to observed cell-secreted concentrations, which arrested osteogenic differentiation in 14 day cultures. Thus, cell instructive biomaterials with engineered mechanical and biochemical properties represent potentially powerful tools for directing BMSC differentiation to tendon and bone, however paracrine signals from tenogenic cells may delay osteogenesis at the healing enthesis.