Taohong Siwu decoction (THSWD), a formulation prescribed in traditional Chinese medicine (TCM), has been widely used in the treatment of osteoarthritis (OA). TCM has the potential to prevent diseases, such as OA, in an integrative and holistic manner. However, the system-level characterization of the drug-target interactions of THSWD has not been elucidated. In the present study, we constructed a novel modeling system, by integrating chemical space, virtual screening and network pharmacology, to investigate the molecular mechanism of action of THSWD. The chemical distribution of the ligand database and the potential compound prediction demonstrated that THSWD, as a natural combinatorial chemical library, comprises abundant drug-like and lead-like compounds that may act as potential inhibitors for a number of important target proteins associated with OA. Moreover, the results of the ‘compound-target network’ analysis demonstrated that 19 compounds within THSWD were correlated with more than one target, whilst the maximum degree of correlation for the compounds was seven. Furthermore, the ‘target-disease network’ indicated that THSWD may potentially be effective against 69 diseases. These results may aid in the understanding of the use of THSWD as a multi-target therapy in OA. Moreover, they may be useful in establishing other pharmacological effects that may be brought about by THSWD. The in silico method used in this study has the potential to advance the understanding of the molecular mechanisms of TCM.