Background: Osteoarthritis (OA) is a degenerative disease that leads to the progressive destruction of articular cartilage. Current clinical therapeutic strategies are moderately effective at relieving pain, but often cannot induce chondrocyte differentiation and achieve cartilage regeneration. Wedelolactone, an active chemical ingredient derived from Eclipta alba, has been reported to facilitate osteoblastogenesis but inhibits adipogenesis in MSCs. However, the effects of wedelolactone on chondrogenic differentiation of MSCs remain largely unknown. Methods: Human-induced pluripotent stem cell (iPSC)-derived MSCs and rat bone marrow MSCs were treated with wedelolactone. Then, real-time reverse transcription-polymerase chain reaction (RT-PCR), immunohistochemical staining, and immunofluorescence staining were used to evaluate the effects of wedelolactone on chondrogenic differentiation of MSCs. To explore the potential mechanism of the effects of wedelolactone on chondrogenic differentiation of MSCs, we performed RNA-seq, miRNA-seq, isobaric tags for relative and absolute quantitation (iTRAQ) analysis, and ChIP-qPCR. Results: We demonstrated that wedelolactone had a beneficial effect on the chondrogenic differentiation of human-induced pluripotent stem cell (iPSC)-derived mesenchymal stem cells (MSCs) and rat bone marrow MSCs. Notably, the forkhead box O (FOXO) signaling pathway was upregulated by wedelolactone during chondrogenic differentiation. The FOXO1 inhibitor attenuated the effect of wedelolactone on chondrocyte differentiation. Mechanistically, wedelolactone reduced the enhancer of zeste homolog 2 (EZH2)-mediated histone 3 lysine 27 trimethylation (H3K27me3) on the promoter region of FOXO1 to increase its transcription. Additionally, wedelolactone repressed microRNA (miR)-1271-5p expression in an EZH2-mediated H3K27me3 independent manner. Further, miR-1271-5p post-transcriptionally suppressed FOXO1 expression dependent on the binding of miR-1271-5p to the FOXO1 3′-UTR. Conclusion: These results indicate that wedelolactone suppresses EZH2 to facilitate the chondrogenic differentiation of MSCs by activating the FOXO1 signaling pathway, suggesting that wedelolactone might improve cartilage regeneration in diseases characterized by inflammatory tissue destruction, such as OA.