Osteoarthritis is a bone and joint condition characterized pathologically by articular cartilage degenerative damage and can develop into a devastating and permanently disabling disorder. This investigation aimed to formulate the anti-inflammatory drug lornoxicam (LOR) into bile salt–enriched vesicles loaded in an in situ forming hydrogel as a potential local treatment of osteoarthritis. This was achieved by formulating LOR-loaded bilosomes that are also loaded with superparamagnetic iron oxide nanoparticles (SPIONs) for intra-muscular (IM) administration to improve joint targeting and localization by applying an external magnet to the joint. A 31.22 full factorial design was employed to develop the bilosomal dispersions and the optimized formula including SPION (LSB) was loaded into a thermosensitive hydrogel. Moreover, in vivo evaluation revealed that the IM administration of LSB combined with the application of an external magnet to the joint reversed carrageen-induced suppression in motor activity and osteoprotegerin by significantly reducing the elevations in mitogen-activated protein kinases, extracellular signal-regulated kinase, and receptor activator of nuclear factor kappa beta/osteoprotegerin expressions. In addition, the histopathological evaluation of knee joint tissues showed a remarkable improvement in the injured joint tissues. The results proved that the developed LSB could be a promising IM drug delivery system for osteoarthritis management.Graphical