Background: Knee osteoarthritis (KOA) is a prevalent disabling condition characterized by pain, stiffness, and functional limitations, significantly impacting quality of life, particularly among older adults. Instrument-assisted soft tissue mobilization (IASTM) is a technique that has shown promise in reducing pain and increasing the range of motion. Objectives: This study aimed to investigate the effects of IASTM on functional measures and quality of life in KOA patients. Methods: Thirty participants with unilateral KOA were randomized into IASTM and sham groups. The intervention consisted of four sessions over two weeks, combining IASTM with exercise therapy. Functional performance was assessed using the 6-minute walking test (6MWT) and the timed up and go test (TUG). Quality of life was evaluated using the 36-item short-form health survey (SF-36) and the Lequesne Algofunctional Index (LAI) Questionnaires. Results: A mixed ANOVA revealed significant improvements in functional performance in both groups after treatment in the 6MWT (P < 0.001) and TUG (P = 0.003) tests. Significant improvements were observed in the SF-36 subgroups for physical functioning (P = 0.002), role limitations due to physical problems (P < 0.001), energy/vitality (P < 0.001), pain (P < 0.001), and total score (P < 0.001). There was also a significant time*group interaction effect for role limitations due to emotional problems (P = 0.005), with the IASTM group showing improvement after treatment while the sham group experienced a decline. The LAI questionnaire also indicated significant improvements in both groups (P < 0.001) after treatment. Conclusions: Both IASTM and sham interventions, combined with exercise therapy, led to improvements in functional measures and quality of life. However, the IASTM group exhibited a more pronounced positive trend in the 6MWT and TUG tests, as well as a significant interaction effect for emotional role limitations. These findings suggest that while exercise alone can improve function and quality of life, the addition of IASTM may further enhance these outcomes, supporting its integration into KOA management strategies to improve activities of daily living and overall quality of life.