Objective. CD248 is a transmembrane glycoprotein expressed on the surface of activated perivascular and fibroblast-like cells. This study was undertaken to explore the function of CD248 and its cytoplasmic domain in arthritis. Methods. Synovial tissue biopsy samples from healthy controls, from patients with psoriatic arthritis (PsA), and from patients with rheumatoid arthritis (RA) were stained for CD248. Transgenic mice that were CD248-deficient (CD248-knockout [CD248(KO/KO)]) or mice with CD248 lacking the cytoplasmic domain (CD248(CyD/CyD)) were generated. Collagen antibody-induced arthritis (CAIA) was induced in these mice and in corresponding wild-type (WT) mice as controls. Clinical signs and histologic features of arthritis were evaluated. Cytokine levels were determined by enzyme-linked immunosorbent assay, and the number of infiltrating inflammatory cells was quantified by immuno-histochemistry. In vitro studies were performed with fibroblasts from CD248-transgenic mouse embryos to explain the observed effects on inflammation. Results. Immunostaining of synovium from patients with PsA and patients with RA and that from mice after the induction of CAIA revealed strong CD248 expression in perivascular and fibroblast-like stromal cells. CD248(KO/KO) and CD248(CyD/CyD) mice had less severe arthritis, with lower plasma levels of proinflammatory cytokines, as compared with WT controls. Moreover, the joints of these mice had less synovial hyperplasia, reduced accumulation of inflammatory cells, and less articular cartilage and bone damage. Tumor necrosis factor alpha-induced monocyte adhesion to CD248(CyD/CyD) fibroblasts was impaired. CD248(CyD/CyD) fibroblasts exhibited reduced expression of hypoxia-inducible factor 1 alpha, placental growth factor, vascular endothelial growth factor, and matrix metalloproteinase 9 activity in response to transforming growth factor beta. Conclusion. CD248 contributes to synovial hyperplasia and leukocyte accumulation in inflammatory arthritis, the effects of which are mediated partly via its cytoplasmic domain. CD248 is therefore a potential new target in the treatment of arthritis.