Osteoarthritis (OA) is characterized by degradation of the cartilage matrix, leading to pathologic changes in the joints. However, the pathogenic effects of synovial tissue inflammation on OA knees are not clear. To investigate whether the inflammation caused by the medial plica is involved in the pathogenesis of osteoarthritis, we examined the expression of matrix metalloproteinases (MMPs), tissue inhibitors of metalloproteinases (TIMPs), interleukin (IL)-1β, and tumor necrosis factor (TNF)-α in the medial plica and pannus-like tissue in the knees of patients with medial compartment OA who underwent either arthroscopic medial release (stage II; 15 knee joints from 15 patients) or total knee replacement (stage IV; 18 knee joints from 18 patients). MMP-2, MMP-3, MMP-9, IL-1β, and TNF-α mRNA and protein levels measured, respectively, by quantitative real-time PCR and Quantibody human MMP arrays, were highly expressed in extracts of medial plica and pannus-like tissue from stage IV knee joints. Immunohistochemical staining also demonstrated high expression of MMP-2, MMP-3, and MMP-9 in plica and pannus-like tissue of stage IV OA knees and not in normal cartilage. Some TIMP/MMP ratios decreased significantly in both medial plica and pannus-like tissue as disease progressed from stage II to stage IV. Furthermore, the migration of cells from the pannus-like tissue was enhanced by IL-1β, while plica cell migration was enhanced by TNF-α. The results suggest that medial plica and pannus-like tissue may be involved in the process of cartilage degradation in medial compartment OA of the knee.