AbstractNovel treatment strategies are urgently required for osteoarthritis (OA). Palmitoylethanolamide (PEA) is a naturally occurring fatty acid amide with analgesic and anti-inflammatory effects. We aimed to examine its effect on OA and elucidate the molecular mechanism of actions in monosodium iodoacetate (MIA)-induced OA Sprague–Dawley rats. The experimental animals were divided into normal control group (injected with saline + treated with phosphate-buffered saline (PBS), NOR), control group (injected with MIA + treated with PBS, CON), 50 or 100 mg/kg body weight (BW)/day PEA-treated group (injected with MIA + treated with 50 or 100 mg of PEA/kg BW/day, PEA50 or PEA100), and positive control group (injected with MIA + treated with 6 mg of diclofenac/kg BW/day, DiC). The changes in blood parameters, body parameters, gene expression of inflammatory mediators and cytokines, knee thickness, and joint tissue were observed. Oral administration of PEA had no adverse effects on the BW, liver, or kidneys. PEA reduced knee joint swelling and cartilage degradation in MIA-induced OA rats. The serum levels of leukotriene B4, nitric oxide, tumor necrosis factor (TNF)-α, interleukin (IL)-1β, and prostaglandin E2 considerably reduced in the PEA100 group compared with those in the CON group. In the synovia of knee joints, the mRNA expression of iNOS, 5-Lox, Cox-2, Il-1β, Tnf-α, and Mmp-2, -3, -9, and -13 apparently increased with MIA administration. Meanwhile, Timp-1 mRNA expression apparently decreased in the CON group but increased to the normal level with PEA treatment. Thus, PEA can be an effective therapeutic agent for OA.