Objective To investigate the effect and underlying mechanism of Bushenhuoxue (BSHX) formula on articular cartilage repair. Methods Twenty-four full-thickness cartilage defect rats were divided into two groups: model group and BSHX group (treated with BSHX formula). Macroscopic observation and histopathological study were conducted after 4- and 8-week treatment. Additionally, we also evaluated chondrocyte proliferation, extracellular matrix (ECM) deposition, cartilage degradation, and chondrocyte hypertrophy-related genes expression in chondrogenic ATDC5 cells cultured in BSHX formula-mediated serum. Moreover, we assessed aforementioned genes expression and pSMAD2/3 protein level in Tgfβr2 siRNA transfected chondrogenic ATDC5 cells in order to address whether BSHX formula exerts cartilage repairing effect through TGF-β signaling. Results Neocartilage regeneration promotion effect was observed in cartilage defect rats after BSHX formula treatment, with increases in Col2 and pSMAD2 and decreases in Mmp13 and Runx2. Moreover, cell proliferation, the elevated Col2a1, Aggrecan and pSMAD2/3, reduced Mmp13, Adamts5, Col10a1, and Runx2 expression were also observed in chondrogenic ATDC5 cells cultured in BSHX formula-mediated serum. Besides, the expression alteration of ECM deposition, cartilage degradation, chondrocyte hypertrophy-related genes, and pSMAD2/3 protein levels presented in Tgfβr2 downregulated chondrogenic ATDC5 cells couldn't be adjusted by BSHX formula treatment. Conclusion By activation of TGF-β signaling, BSHX formula can promote articular cartilage repair by accelerating chondrocyte proliferation and maintaining chondrocyte phenotype, upregulate ECM accumulation, and inhibit matrix degradation.