Fermented barley extract (FBE) was reported to have anti-inflammatory effects. The aim of this study was to identify anti-inflammatory compounds in FBE and elucidate their mechanisms of action. We investigated the effects of compounds isolated from FBE on T cells and chondrocytes at the level of gene and protein expression. As a result, pyroglutamyl peptide (pEPYP) increased IL-10 expression by T cells and decreased MMP-13 expression by chondrocytes. Moreover, pEPYP inhibited paw inflammation in collagen-induced arthritis (CIA) model rats. The serum concentration of anti-collagen type II antibody in the pEPYP group was less than that in the control group, although not significantly. Decreased inflammatory cell infiltration was observed in histopathological specimens of the pEPYP group as compared to the control group. These results suggest that pEPYP contained in FBE suppressed joint inflammation by increasing T cell-derived IL-10 and decreasing chondrocyte-derived MMP-13.