Knee osteoarthritis (OA) is the most prevalent type of OA and the cytokine, oncostatin M (OSM), may contribute to the pathogenesis of OA. However, the exact role of OSM in the development of knee OA and the underlying mechanisms are not yet fully understood. This study was designed to detect the expression of OSM in the synovial tissue of patients with knee OA. Furthermore, we investigated whether Notch signaling is involved in the effects of OSM on MC3T3-E1 cell proliferation and differentiation. The synovial tissue of the knee joint was collected from 32 patients with knee OA. We detected OSM mRNA and protein expression (by RT-qPCR and western blot analysis, respectively) in the synovial tissue of the knee joint, and the expression level of OSM was higher in the patients with knee OA compared with the controls. MTT assay was used in the in vitro experiments to determine MC3T3-E1 cell proliferation, and cell differentiation was determined by measuring alkaline phosphatase (ALP) activity and osteocalcin (OCN) expression. The results from our in vitro experiments revealed that OSM induced bone formation by increasing osteoblast cell proliferation and differentiation. In addition, the expression levels of Notch ligand, receptor and target gene, including Delta-like 1 (Dll1), Notch homolog 1 (Notch1) and Hes family bHLH transcription factor 1 (Hes1) were decreased following treatment with OSM in a time-dependent manner in the MC3T3-E1 cells. A Dll1 overexpression vector was transfected into the cells to activate Notch signaling, and the results revealed that the activation of Notch signaling attenuated the effects of OSM on MC3T3-E1 cell proliferation and differentiation. In conclusion, our data demonstrate that elevated levels of OSM in synovial tissue induce bone formation by increasing osteoblast cell proliferation and differentiation. The Notch signaling pathway was found to be one of the signaling pathways that inhibit OSM-induced MC3T3-E1 cell proliferation and differentiation. The findings of this study may broaden our understanding of the mechanisms behing the role of OSM in the development of knee OA.