In osteoarthritis (OA), inflammation and apoptosis are two important factors contributing to disease progression. As kallistatin can suppress inflammatory responses and reduce cell apoptosis, we investigated the therapeutic effect of kallistatin gene transfer in the rat model of OA by anterior cruciate ligament transection (ACLT). OA was induced in Wistar rats by ACLT in the knee of one hind limb. Adenoviral vector encoding human kallistatin (AdHKBP) was injected intraarticularly into the knee joints after ACLT. The viral effect on tissue was evaluated. The inflammatory responses and transgene expression were determined by immunoblot analysis, enzyme-linked immunosorbent assay, and immunohistochemistry. Apoptosis of chondrocytes was quantified by TUNEL assay. The effects of kallistatin in combination with hyaluronic acid (HA) on the medial femoral condyles and synovia were also assessed histologically. Inflammation trigged by the vectors was limited. Expression of human kallistatin after intraarticular injection was identified. Kallistatin gene transfer reduced the levels of interleukin-1beta and tumor necrosis factor-alpha in joints. Examination of gross morphology revealed that rats treated with AdHKBP had reduced severity of OA compared with control rats treated with adenoviral vector encoding green fluorescent protein (AdGFP). The protective effect of kallistatin on cartilage was accompanied by a decrease in apoptotic cells. Intraarticular administration of AdHKBP, when in conjunction with HA, significantly improved knee joint histologic scores. These results suggest that local administration of adenoviral vectors encoding kallistatin significantly suppressed OA progression, accompanied by reduction of inflammatory response and apoptosis. Thus, kallistatin gene therapy may be a potential treatment for OA.