Loss and dysfunction of articular chondrocytes, which disrupt the homeostasis of extracellular matrix formation and breakdown, promote the onset of osteoarthritis (OA). Targeting inflammatory pathways is an important therapeutic strategy for OA. Vasoactive intestinal peptide (VIP) is an immunosuppressive neuropeptide with potent anti-inflammatory effects; however, its role and mechanism in OA remain unclear. In this study, microarray expression profiling from the Gene Expression Omnibus database and integrative bioinformatics analyses were performed to identify differentially expressed lncRNAs in OA samples. qRT-PCR validation of the top ten different expressed lncRNAs indicated that the expression level of intergenic non-protein coding RNA 2203 (LINC02203, also named LOC727924) was the highest in OA cartilage compared to normal cartilage. Hence, the LOC727924 function was further investigated. LOC727924 was upregulated in OA chondrocytes, with a dominant sub-localization in the cytoplasm. In OA chondrocytes, LOC727924 knockdown boosted cell viability, suppressed cell apoptosis, reactive oxygen species (ROS) accumulation, increased aggrecan and collagen II, decreased matrix metallopeptidase (MMP)-3/13 and ADAM metallopeptidase with thrombospondin type 1 motif (ADAMTS)-4/5 levels, and reduced the levels of tumor necrosis factor alpha (TNF-α), interleukin 1 beta (IL-1β), and interleukin 6 (IL-6). LOC727924 could interact with the microRNA 26a (miR-26a)/ karyopherin subunit alpha 3 (KPNA3) axis by competitively targeting miR-26a for KPNA3 binding, therefore down-regulating miR-26a and upregulating KPNA3; in OA chondrocytes, miR-26a inhibition partially abolished LOC727924 knockdown effects on chondrocytes. miR-26a inhibited the nuclear translocation of p65 through targeting KPNA3 and p65 transcriptionally activated LOC727924, forming a p65-LOC727924-miR-26a/KPNA3-p65 regulatory loop to modulate OA chondrocyte phenotypes. In vitro, VIP improved OA chondrocyte proliferation and functions, down-regulated LOC727924, KPNA3, and p65 expression, and upregulated miR-26a expression; in vivo, VIP ameliorated destabilization of the medial meniscus (DMM)-induced damages on the mouse knee joint, down-regulated KPNA3, inhibited the nuclear translocation of p65. In conclusion, the p65-LOC727924-miR-26a/KPNA3-p65 regulatory loop modulates OA chondrocyte apoptosis, ROS accumulation, extracellular matrix (ECM) deposition, and inflammatory response in vitro and OA development in vivo, being one of the mechanisms mediating VIP ameliorating OA.