Aims. Pigment epithelium-derived factor (PEDF) is known to induce several types of tissue regeneration by activating tissue-specific stem cells. Here, we investigated the therapeutic potential of PEDF 29-mer peptide in the damaged articular cartilage (AC) in rat osteoarthritis (OA). Methods. Mesenchymal stem/stromal cells (MSCs) were isolated from rat bone marrow (BM) and used to evaluate the impact of 29-mer on chondrogenic differentiation of BM-MSCs in culture. Knee OA was induced in rats by a single intra-articular injection of monosodium iodoacetate (MIA) in the right knees (set to day 0). The 29-mer dissolved in 5% hyaluronic acid (HA) was intra-articularly injected into right knees at day 8 and 12 after MIA injection. Subsequently, the therapeutic effect of the 29-mer/HA on OA was evaluated by the Osteoarthritis Research Society International (OARSI) histopathological scoring system and changes in hind paw weight distribution, respectively. The regeneration of chondrocytes in damaged AC was detected by dual-immunostaining of 5-bromo-2'-deoxyuridine (BrdU) and chondrogenic markers. Results. The 29-mer promoted expansion and chondrogenic differentiation of BM-MSCs cultured in different defined media. MIA injection caused chondrocyte death throughout the AC, with cartilage degeneration thereafter. The 29-mer/HA treatment induced extensive chondrocyte regeneration in the damaged AC and suppressed MIA-induced synovitis, accompanied by the recovery of cartilage matrix. Pharmacological inhibitors of PEDF receptor (PEDFR) and signal transducer and activator of transcription 3 (STAT3) signalling substantially blocked the chondrogenic promoting activity of 29-mer on the cultured BM-MSCs and injured AC. Conclusion. The 29-mer/HA formulation effectively induces chondrocyte regeneration and formation of cartilage matrix in the damaged AC. Cite this article: Bone Joint Res 2024;13(4):137–148