Osteoarthritis is a typical degenerative joint disease related to a lubrication deficiency of articular cartilage, which is characterized by increased friction at the joint surface and severe inflammation of the joint capsule. Consequently, therapies combining lubrication restoration and drug intervention are regarded as a promising strategy for the treatment of osteoarthritis. In the present study, thermo-sensitive dual-functional nanospheres, poly[N-isopropylacrylamide-2-methacryloyloxyethyl phosphorylcholine] (PNIPAM-PMPC), are developed through emulsion polymerization. The PNIPAM-PMPC nanospheres could enhance lubrication based on the hydration lubrication mechanism by forming a tenacious hydration layer surrounding the zwitterionic headgroups, and achieve local drug delivery by encapsulating the anti-inflammatory drug diclofenac sodium. The lubrication and drug release tests showed improved lubrication and thermo-sensitive drug release of the nanospheres. The in vitro test using cytokines-treated chondrocytes indicated that the PNIPAM-PMPC nanospheres were biocompatible and upregulated anabolic genes and simultaneously downregulated catabolic genes of the articular cartilage. In summary, the developed PNIPAM-PMPC nanospheres, with the property of enhanced lubrication and local drug delivery, can be an effective nanomedicine for the treatment of osteoarthritis.