To evaluate whether arthroscopic lateral retinacular release and the modified Elmslie-Trillat operation improve osteoarthritis (OA) progression and clinical outcomes in patients with severe isolated lateral patello-femoral OA. Nine women (11 knees) and one man (one knee) with isolated late-stage lateral patello-femoral OA underwent surgery. The severity of patello-femoral OA was recorded using the Merchant method, while the level of pain and anterior knee function were scored using the visual analogue scale (VAS) and Kujala knee scores, respectively. The articular cartilage was graded under arthroscopy using the Outerbridge classification. All of the patients underwent the modified Elmslie-Trillat operation after arthroscopic surgery, including lateral retinacular release. Ten patients (12 knees) had a mean 6.45 ± 0.80 mm of medial transfer, 6.02 ± 0.80 mm of anterior transfer of the tibial tubercle, and follow-up of 67.0 months. The mean VAS and Kujala knee scores improved from 8 ± 0.17 preoperatively to 2.33 ± 0.33 on the last follow-up and from 43.08 ± 2.09 to 68.83 ± 2.59, respectively (both p < 0.001). Postoperatively, all had improved subchondral bone remodeling, including cyst resolution, density and trabeculae normalization, and subchondral smoothing in the patello-femoral compartment. The patello-femoral joint space and patellar thickness increased from 0.39 ± 0.16 mm to 1.77 ± 0.18 mm and from 18.28 ± 0.67 mm to 19.60 ± 0.69 mm, respectively (p < 0.001 and p = 0.005). Treatment of severe isolated lateral patello-femoral OA using arthroscopic lateral retinacular release and the modified Elmslie-Trillat operation can improve pain relief, functional outcomes, and subchondral bone remodeling, and also restore the patello-femoral joint space and patellar thickness. Prompt transfer of the tibial tubercle seems to reverse the progress of OA radiographically.