Osteoarthritis (OA) is a degenerative cartilage disease that is characterized by a local inflammatory reaction. Consequently, many studies have been performed to identify suitable prevention and treatment interventions. In recent years, both arthroscopic microfracture (AM) and stem cell therapy have been used clinically to treat OA. This study aimed to evaluate the clinical effects of AM in the presence and absence of a stromal vascular fraction (SVF) injection in the management of patients with OA. Thirty patients with grade 2 or 3 (Lawrence scale) OA of the knee participated in this study. Placebo group patients (n = 15) received AM alone; treatment group patients (n = 15) received AM and an adipose tissue‐derived SVF injection. The SVF was suspended in platelet‐rich plasma (PRP) before injection into the joint. Patient groups were monitored and scored with the Western Ontario and McMaster Universities Arthritis Index (WOMAC), Lysholm, Visual Analog Pain Scale (VAS), and modified Outerbridge classifications before treatment and at 6, 12, and 18 months post‐treatment. Bone marrow edema was also assessed at these time points. Patients were evaluated for knee activity (joint motion amplitude) and adverse effects relating to surgery and stem cell injection. Treatment efficacy was significantly different between placebo and treatment groups. All treatment group patients had significantly reduced pain and WOMAC scores, and increased Lysholm and VAS scores compared with the placebo group. These findings suggest that the SVF/PRP injection efficiently improved OA for 18 months after treatment. This study will be continuously monitored for additional 24 months. Stem Cells Translational Medicine 2017;6:187–195