Background: Osteoarthritis (OA) is a prevalent and disabling disease that affects a significant proportion of the global population. Urine-derived stem cells (USCs) have shown great prospects in the treatment of OA, but there is no study that has compared them with traditional stem cells. Purpose: This study aimed to compare the therapeutic efficacy and mechanisms of USCs and adipose-derived stem cells (ADSCs) for OA treatment. Study Design: Controlled laboratory study. Methods: We compared the biological properties of USCs and ADSCs using CCK-8, colony formation, EdU, adhesion, and apoptosis assays. We evaluated the protective effects of USCs and ADSCs on IL-1β–treated OA chondrocytes by chemical staining, immunofluorescence, and Western blotting. We assessed the effects of USCs and ADSCs on chondrocyte autophagy by transmission electron microscopy, immunofluorescence, and Western blotting. We also compared the therapeutic efficacy of intra-articular injections of USCs and ADSCs by gross, histological, micro–computed tomography, and immunohistochemical analyses in an OA rat model induced by anterior cruciate ligament transection. Results: USCs showed higher proliferation, colony formation, DNA synthesis, adhesion, and anti-apoptotic abilities than ADSCs. Both USCs and ADSCs increased the expression of cartilage-specific proteins and decreased the expression of matrix degradation–related proteins and inflammatory factors in OA chondrocytes. USCs had a greater advantage in suppressing MMP-13 and inflammatory factors than ADSCs. Both USCs and ADSCs enhanced autophagy in OA chondrocytes, with USCs being more effective than ADSCs. The autophagy inhibitor 3-MA reduced the enhanced autophagy and protective effects of USCs and ADSCs on OA chondrocytes. Conclusion: To our knowledge, this is the first study to explore the efficacy of USCs in the treatment of knee OA and to compare them with ADSCs. Considering the superior properties of USCs in terms of noninvasive acquisition, a high cost-benefit ratio, and low ethical concerns, our study suggests that they may be a more promising therapeutic option than ADSCs for OA treatment under rigorous regulatory pathways. Clinical Relevance: USCs may be a superior cell source for stem cells to treat knee OA, and this study strengthens the evidence for the application of USCs.