Our previous clinical evidence suggested that the direct application of "Sanse powder" the main ingredient of "Yiceng" might represent an alternative treatment for knee osteoarthritis. However, the mechanism underlying its effect is poorly understood. In this study, we investigated the mechanism of the effect of direct "Sanse powder" application for the treatment of knee osteoarthritis (KOA) in rats by using lipidomics. KOA rats were established by cutting the anterior cruciate ligament, and the cold pain threshold and mechanical withdrawal threshold (MWT) of seven rats from each group were measured before modelling (0 days) and at 7, 14, 21 and 28 days after modelling. Histopathological evaluation of the synovial tissue was performed by haematoxylin and eosin (H&E) staining after modelling for 28 days. Interleukin-1β (IL-1β), pro-interleukin-1β (pro-IL-1β) and tumor necrosis factor-α (TNF-α) proteins in synovial tissue were measured by western blot, and the mRNA expression levels of IL-1β and TNF-α in synovial tissue were measured using Real-time reverse transcription polymerase chain reaction (qRT-PCR), the levels of IL-1β and TNF-α in rat serum were measured by enzyme-linked immunosorbent assay (ELISA), Serum lipid profiles were obtained by using ultra-performance liquid chromatography combined with quadrupole-Exactive Orbitrap mass spectrometry (UPLC-Q-Exactive Orbitrap MS). The results confirmed that the direct application of "Sanse powder" had a significant protective effect against KOA in rats. Treatment with "Sanse powder" not only attenuated synovial tissue inflammation but also increased the levels of the cold pain threshold and MWT. In addition, the lipidomics results showed that the levels of diacylglycerol (DAG), triacylglycerols (TAGs), lysophosphatidylcholine (LPC), phosphatidylcholine (PC), fatty acid esters of hydroxy fatty acids (FAHFAs), and phosphatidylethanolamine (PE) were restored almost to control levels following treatment. Lipidomics provides a better understanding of the actions of direct application "Sanse powder" therapy for KOA.