Osteoarthritis (OA), the most common form of arthritis, is a disabling degenerative joint disease affecting synovial joints and is associated with cartilage destruction, inflammation of the synovial membrane, and subchondral bone remodeling. Inflammation of the synovial membrane may arise secondary to degenerative processes in articular cartilage (AC), or may be a primary occurrence in OA pathogenesis. However, synovial inflammation plays a key role in the pathogenesis and disease progression of OA through the production of pro-inflammatory mediators, and is associated with cartilage destruction and pain. The triggers that initiate activation of the immune response in OA are unknown, but crosstalk between osteoarthritic chondrocytes, cartilage degradation products, and the synovium may act to perpetuate this response. Increasing evidence has emerged highlighting an important role for pro-inflammatory mediators and infiltrating inflammatory cell populations in the progression of the disease. Tissue engineering strategies hold great potential for the repair of damaged AC in an osteoarthritic joint. However, an in-depth understanding of how OA-associated inflammation impacts chondrocyte and progenitor cell behavior is required to achieve efficient cartilage regeneration in a catabolic osteoarthritic environment. In this review, we will discuss the role of inflammation in OA, and investigate novel immune modulation strategies that may prevent disease progression and facilitate successful cartilage regeneration for the treatment of OA.