Since cytokine receptor-like factor 1 (CRLF1) has been implicated in tissue regeneration, we hypothesized that CRLF1 released by mesenchymal stem cells can promote the repair of osteochondral defects. The degree of a femoral osteochondral defect repair in rabbits after intra-articular injections of bone marrow-derived mesenchymal stem cells (BMSCs) that were transduced with empty adeno-associated virus (AAV) or AAV containing CRLF1 was determined by morphological, histological, and micro computer tomography (CT) analyses. The effects of CRLF1 on chondrogenic differentiation of BMSCs or catabolic events of interleukin-1beta-treated chondrocyte cell line TC28a2 were determined by alcian blue staining, gene expression levels of cartilage and catabolic marker genes using real-time PCR analysis, and immunoblot analysis of Smad2/3 and STAT3 signaling. Intra-articular injections of BMSCs overexpressing CRLF1 markedly improved repair of a rabbit femoral osteochondral defect. Overexpression of CRLF1 in BMSCs resulted in the release of a homodimeric CRLF1 complex that stimulated chondrogenic differentiation of BMSCs via enhancing Smad2/3 signaling, whereas the suppression of CRLF1 expression inhibited chondrogenic differentiation. In addition, CRLF1 inhibited catabolic events in TC28a2 cells cultured in an inflammatory environment, while a heterodimeric complex of CRLF1 and cardiotrophin-like Cytokine (CLC) stimulated catabolic events via STAT3 activation. A homodimeric CRLF1 complex released by BMSCs enhanced the repair of osteochondral defects via the inhibition of catabolic events in chondrocytes and the stimulation of chondrogenic differentiation of precursor cells.