Shikonin, a natural product from Lithospermum erythrorhizon, exerts a wide range of anti-inflammatory actions both in vitro and in vivo. Matrix metalloproteinases (MMPs) have long been considered as the major catabolic enzymes involved in osteoarthritis (OA) cartilage erosion. Here, we investigated the anti-inflammatory and effects of shikonin on MMPs in both IL-1β induced rabbit chondrocytes and the experimental rabbit OA model induced by anterior cruciate ligament (ACL) transection and evaluated the potential involvement of nuclear factor kappa B (NF-κB) in the processes. In vitro, rabbit chondrocytes were cultured and pretreated with shikonin (0, 1, 5, 10 μM) for 1 h (h) with or without IL-1β (10 ng/ml) for 24 h. The expression of MMPs (MMP-1, MMP-3 and MMP-13) and tissue inhibitors of metalloproteinase-1 (TIMP-1) at mRNA and protein levels were determined by quantitative real-time PCR and ELISA respectively. NF-κB related signaling molecules were investigated by Western blotting. In vivo study, the effects of shikonin on MMPs and TIMP-1 were determined at the gene level and the cartilage damage was evaluated at the histological level after the rabbits sacrificed. We found that shikonin significantly reversed the elevated expression of MMP-1, MMP-3 and MMP-13 and the reduced expression of TIMP-1 at both gene and protein levels in IL-1β induced chondrocytes. Additionally, the reduction of IκBα and the activation of NF-κB p65 induced by IL-1β were subsided by shikonin in rabbit chondrocytes. In vivo, both the cartilage damage and the elevated expression of MMP-1, MMP-3 and MMP-13 and the decreased expression of TIMP-1 were ameliorated in shikonin intra-articular injection knees compared to vehicle knees. Our findings indicated that shikonin have anti-inflammatory and chondro-protective effects and may be a potential therapeutic agent for the treatment of OA.