circRNAs play an important role in the progression of osteoarthritis (OA). Therefore, we aimed to reveal the mechanism of action of circRNA-ZCCHC14 in OA. OA animal and cell models were constructed, and clinical samples were collected. The expression of circRNA-ZCCHC14 and miR-181a was detected by RT‒qPCR. The chondrogenic differentiation ability of peripheral blood-derived mesenchymal stem cells (PBMSCs) was detected by Alcian blue staining. The expression of chondrogenic differentiation-related proteins was detected by Western blotting. Double fluorescein experiments verified the targeting relationship of miR-181a with circRNA-ZCCHC14 and GREM1. Upregulation of circRNA-ZCCHC14 was observed in blood, in BMP-2- and TGF-β3-treated PBMSCs from OA patients and in animal models. Knockdown of circRNA-ZCCHC14 promoted the chondrogenic differentiation ability of PBMSCs. circRNA-ZCCHC14 was found to bind to miR-181a and negatively regulate miR-181a expression. Inhibition of miR-181a reversed the promoting effect of circRNA-ZCCHC14 knockdown on the chondrogenic differentiation ability of PBMSCs. GREM1 was identified as a target of miR-181a. Overexpression and knockdown of GREM1 regulated the expression of BMP2, which in turn affected the chondrogenic differentiation ability of PBMSCs, indicating that GREM1 and BMP2 have antagonistic effects and that they jointly regulate the chondrogenic differentiation of PBMSCs. circRNA-ZCCHC14 may promote the chondrogenic differentiation ability of PBMSCs by regulating miR-181a and inhibiting the expression of GREM1.