Osteoarthritis (OA), a degenerative joint disorder, is a major reason of disability in adults. Accumulating evidences have proved that bone marrow mesenchymal stem cells (BMSCs)-carried exosomes play a significant therapeutic effect on OA. However, the precise regulatory network remains unknown. OA and normal cartilage samples were acquired from patients, and chondrocytes were exposed to IL-1β to conduct a cellular OA model. Exosomes prepared from BMSCs were identified using nanoparticle tracking analysis (NTA) and transmission electron microscopy (TEM). Cell viability was determined with CCK-8 assay. Inflammatory injury was assessed by LDH and inflammatory factors (TNF-α and IL-6) using corresponding ELISA kits, respectively. Ferroptosis was evaluated by GSH, MDA and iron levels using corresponding kits, and ROS level with DCFH-DA. The expressions of genes/proteins were determined with RT-qPCR/western bolt. RNA immunoprecipitation and luciferase activity assay were conducted for testing the interactions of small nucleolar RNA host gene 7 (SNHG7)/ferroptosis suppressor protein 1 (FSP1) and miR-485-5p. The expressions of SNHG7 and FSP1 were both reduced in IL-1β-induced chondrocytes and OA cartilage tissues, and there was a positive correlation between them in clinical level. Moreover, SNHG7 was enriched in BMSCs-derived exosomes (BMSCs-Exos) and could be internalized by chondrocytes. Functional analysis illustrated that BMSCs-Exos administration repressed inflammatory injury, oxidative stress and ferroptosis in IL-1β-induced chondrocytes, while these changes were reinforced when SNHG7 was overexpressed in BMSCs-Exos. Notably, FSP1 silencing in chondrocytes abolished the beneficial effects mediated by exosomal SNHG7. Exosomal SNHG7 released from BMSCs inhibited inflammation and ferroptosis in IL-1β-induced chondrocytes through miR-485-5p/FSP1 axis. This work suggested that BMSCs-derived exosomal SNHG7 would be a prospective target for OA treatment.