The goal of the present study was to develop a fully three-dimensional (3D) coculture system that would allow for systematic evaluation of the interplay between activated macrophages (AMs) and chondrocytes in osteoarthritic disease progression and treatment. Toward this end, our coculture system was first validated against existing in vitro osteoarthritis models, which have generally cultured healthy normal chondrocytes (NCs)-in two-dimensional (2D) or 3D-with proinflammatory AMs in 2D. In this work, NCs and AMs were both encapsulated within poly(ethylene glycol) diacrylate hydrogels to mimic the native 3D environments of both cell types within the osteoarthritic joint. As with previous studies, increases in matrix metalloproteinases (MMPs) and proinflammatory cytokines associated with the early stages of osteoarthritis were observed during NC-AM coculture, as were decreases in protein-level Aggrecan and collagen II. Thereafter, the coculture system was extended to osteoarthritic chondrocytes (OACs) and AMs to evaluate the potential effects of AMs on pre-existing osteoarthritic phenotypes. OACs in coculture with AMs expressed significantly higher levels of MMP-1, MMP-3, MMP-9, MMP-13, IL-1b, TNF-a, IL-6, IL-8, and IFN-g compared to OACs in mono-culture, indicating that proinflammatory macrophages may intensify the abnormal matrix degradation and cytokine secretion already associated with OACs. Likewise, AMs cocultured with OACs expressed significantly more IL-1b and VEGF-A compared to AM mono-culture controls, suggesting that OACs may intensify abnormal macrophage activation. Finally, OACs cultured in the presence of nonactivated macrophages produced lower levels of MMP-9 and proinflammatory cytokines IL-1b, TNF-a, and IFN-g compared to OACs in the OAC-AM system, results that are consistent with anti-inflammatory agents temporarily reducing certain OA symptoms. In summary, the 3D coculture system developed herein captures several key features of inflammatory OA and may prove useful in future screening of therapeutic agents and/or assessment of disease progression mechanisms.