This study was undertaken to generate and characterize human induced pluripotent stem cells (PSCs) from patients with osteoarthritis (OA) and to examine whether these cells can be developed into disease-relevant cell types for use in disease modeling and drug discovery. Human synovial cells isolated from two 71-year-old women with advanced OA were characterized and reprogrammed into induced PSCs by ectopic expression of 4 transcription factors (Oct-4, SOX2, Klf4, and c-Myc). The pluripotency status of each induced PSC line was validated by comparison with human embryonic stem cells (ESCs). We found that OA patient-derived human synovial cells had human mesenchymal stem cell (MSC)-like characteristics, as indicated by the expression of specific markers, including CD14-, CD19-, CD34-, CD45-, CD44+, CD51+, CD90+, CD105+, and CD147+. Microarray analysis of human MSCs and human synovial cells further determined their unique and overlapping gene expression patterns. The pluripotency of established human induced PSCs was confirmed by their human ESC-like morphology, expression of pluripotency markers, gene expression profiles, epigenetic status, normal karyotype, and in vitro and in vivo differentiation potential. The potential of human induced PSCs to differentiate into distinct mesenchymal cell lineages, such as osteoblasts, adipocytes, and chondrocytes, was further confirmed by positive expression of markers for respective cell types and positive staining with alizarin red S (osteoblasts), oil red O (adipocytes), or Alcian blue (chondrocytes). Functional chondrocyte differentiation of induced PSCs in pellet culture and 3-dimensional polycaprolactone scaffold culture was assessed by chondrocyte self-assembly and histology. Our findings indicate that patient-derived synovial cells are an attractive source of MSCs as well as induced PSCs and have the potential to advance cartilage tissue engineering and cell-based models of cartilage defects.