Background: Ellipticine (Ellip.) was recently reported to have beneficial effects on the differentiation of adipose-derived stem cells into mature chondrocyte-like cells. On the other hand, no practical results have been derived from the transplantation of bone marrow stem cells (BMSCs) in a rabbit osteoarthritis (OA) model. Objectives: This study examined whether autologous BMSCs incubated with ellipticine (Ellip.+BMSCs) could regenerate articular cartilage in rabbit OA, a model similar to degenerative arthritis in human beings. Methods: A portion of rabbit articular cartilage was surgically removed, and Ellip.+BMSCs were transplanted into the lesion area. After two and four weeks of treatment, the serum levels of proinflammatory cytokines, i.e., tumor necrosis factor α (TNF-α) and prostaglandin E2 (PGE2), were analyzed, while macroscopic and micro-computed tomography (CT) evaluations were conducted to determine the intensity of cartilage degeneration.Furthermore, immuno-blotting was performed to evaluate the mitogen-activated protein kinases, PI3K/Akt, and nuclear factor-κB (NF-κB) signaling in rabbit OA models. Histological staining was used to confirm the change in the pattern of collagen and proteoglycan in the articular cartilage matrix. Results: The transplantation of Ellip.+BMSCs elicited a chondroprotective effect by reducing the inflammatory factors (TNF-α, PGE2) in a time-dependent manner. Macroscopic observations, micro-CT, and histological staining revealed articular cartilage regeneration with the downregulation of matrix-metallo proteinases (MMPs), preventing articular cartilage degradation. Furthermore, histological observations confirmed a significant boost in the production of chondrocytes, collagen, and proteoglycan compared to the control group. Western blotting data revealed the downregulation of the p38, PI3K-Akt, and NF-κB inflammatory pathways to attenuate inflammation. Conclusions The transplantation of Ellip.+BMSCs normalized the OA condition by boosting the recovery of degenerated articular cartilage and inhibiting the catabolic signaling pathway.