Background Platelet‐rich‐plasma (PRP) is used to treat knee osteoarthritis; however, mechanistic evidence of PRP effectiveness for pain relief is limited. Objective To assess molecular biomarkers and mesenchymal stem cells (MSCs) in synovial fluid during PRP treatment of the osteoarthritic knee joint. Design Single blinded, randomized, placebo controlled pilot study. Setting Veterans Affairs Medical Center. Participants Seventeen participants with mild to moderate knee osteoarthritis were randomized in a 2:1 placebo‐controlled ratio, receiving PRP or saline (placebo) intra‐articular injection into the knee joint. Methods Knee synovial fluid was analyzed before the respective injections and again 10 days following injection. Participants were followed up to 12 months completing visual analog scale (VAS) and Western Ontario and McMaster Universities Osteoarthritis Index (WOMAC) questionnaires at intervals over that period. Main Outcome Measures The effects of PRP on synovial protein and MSC gene expression levels were measured by multiplex enzyme‐linked immunosorbent assay and quantitative polymerase chain reaction. Results Novel biomarkers including levels of interleukin (IL)‐5, IL‐6, IL‐10, and tumor necrosis factor‐α were measured in synovial fluid 10 days after PRP treatment. Altered gene expression profiles in MSCs from patients treated with PRP were observed for matrix metalloproteinases and inflammatory markers (IL‐6, IL‐8, CCL2, TNF‐α). A2M protease was significantly increased following PRP treatment (P = .005). WOMAC scores declined for up to 3 months from baseline levels and remained low at 6 and 12 months in the PRP group. In contrast, WOMAC scores for patients receiving the saline injection were relatively unchanged for up to 12 months. Conclusions We report significant changes for the biomarker A2M (P = .005) as well as differences in expression of cellular markers and postulate that PRP modulates the local knee synovial environment by altering the inflammatory milieu, matrix degradation, and angiogenic growth factors. The PRP treatment group had less pain and stiffness and improved function scores.