Osteosarcoma (OS) is an aggressive and highly lethal bone tumor, highlighting the urgent need for further exploration of its underlying mechanisms. In this study, we conducted analyses utilizing bulk transcriptome sequencing data of OS and healthy control samples, as well as single cell sequencing data, obtained from public databases. Initially, we evaluated the differential expression of four tumor microenvironment (TME)-related gene sets between tumor and control groups. Subsequently, unsupervised clustering analysis of tumor tissues identified two significantly distinct clusters. We calculated the differential scores of the four TME-related gene sets for Clusters 1 (C1) and 2 (C2), using Gene Set Variation Analysis (GSVA, followed by single-variable Cox analysis. For the two clusters, we performed survival analysis, examined disparities in clinical-pathological distribution, analyzed immune cell infiltration and immune evasion prediction, assessed differences in immune infiltration abundance, and evaluated drug sensitivity. Differentially expressed genes (DEGs) between the two clusters were subjected to Gene Ontology (GO) and Gene Set Enrichment Analysis (GSEA). We conducted Weighted Gene Co-expression Network Analysis (WGCNA) on the TARGET-OS dataset to identify key genes, followed by GO enrichment analysis. Using LASSO and multiple regression analysis we conducted a prognostic model comprising eleven genes (ALOX5AP, CD37, BIN2, C3AR1, HCLS1, ACSL5, CD209, FCGR2A, CORO1A, CD74, CD163) demonstrating favorable diagnostic efficacy and prognostic potential in both training and validation cohorts. Using the model, we conducted further immune, drug sensitivity and enrichment analysis. We performed dimensionality reduction and annotation of cell subpopulations in single cell sequencing analysis, with expression profiles of relevant genes in each subpopulation analyzed. We further substantiated the role of ACSL5 in OS through a variety of wet lab experiments. Our study provides new insights and theoretical foundations for the prognosis, treatment, and drug development for OS patients.