Evidence that knee braces used for the treatment of osteoarthritis mediate pain relief and improve function by unloading the joint (increasing the joint separation) remains inconclusive. Alternatively, valgus-producing braces may mediate pain relief by mechanically stabilizing the joint and reducing muscle cocontractions and joint compression. In this study, therefore, we sought to examine the degree to which so-called unloader braces control knee instability and influence muscle cocontractions during gait. Sixteen subjects with radiographic evidence of knee malalignment and medial compartment osteoarthritis were recruited and fitted with a custom Generation II Unloader brace. Gait analysis was performed without use of the brace and with the brace in neutral alignment and in 4 degrees of valgus alignment. A two-week washout period separated the brace conditions. Muscle cocontraction indices were derived for agonist and antagonist muscle pairings. Pain, instability, and functional status were obtained with use of self-reported questionnaires, and the results were compared. The scores for pain, function, and stability were worst when the knee was unsupported (the baseline and washout conditions). At baseline, nine of the sixteen patients reported knee instability and five of the nine complained that it affected their activities of daily living. Poor knee stability was found to be correlated with low ratings for the activities of daily living, quality of life, and global knee function and with increased pain and symptoms. Knee function and stability scored best with the brace in the neutral setting compared with the brace in the valgus setting. The cocontraction of the vastus lateralis-lateral hamstrings was significantly reduced from baseline in both the neutral (p = 0.014) and valgus conditions (p = 0.023), and the cocontraction of the vastus medialis-medial hamstrings was significantly reduced with the valgus setting (p = 0.068), as a result of bracing. Patients with greater varus alignment had greater decreases in vastus lateralis-lateral hamstring muscle cocontraction. When knees with medial compartment osteoarthritis are braced, neutral alignment performs as well as or better than valgus alignment in reducing pain, disability, muscle cocontraction, and knee adduction excursions. Pain relief may result from diminished muscle cocontractions rather than from so-called medial compartment unloading.