In order to assess the therapeutic effects of PG201 (an ethanol extract from herbs) on osteoarthritis, we investigated whether PG201 could suppress the disease progression of collagenase-induced arthritis (CNIA) in rabbits. The right knees of rabbits were injected intra-articularly with collagenase, and the rabbits were orally treated with distilled water (DW), PG201 (200 mg/kg) or diclofenac (DCF, 10 mg/kg) once a day for 8 weeks. Oral administration of PG201 significantly suppressed the stiffness and bone space narrowing. Cartilage erosion and GAG release (p<0.01) were considerably reduced in the knee joints. As well, the mRNA expression of matrix degradation enzymes including MMP-1, -3, and -13 was decreased. On the contrary, the concentrations of TIMP-2 in the synovial fluids were considerably amplified in the PG201 treated group (p<0.01), but not in the DCF treated group. The pathologic inflammatory molecules involved in cartilage destruction such as IL-1beta, PGE2, and NO were also diminished by PG201. Taken together, these results indicate that PG201 has therapeutic effects on CNIA through the prominent protection of cartilage. PG201 indeed has great potential as a form of treatment for osteoarthritis.