We developed an intra-articular (IA) drug delivery system to treat osteoarthritis (OA) that consisted of kartogenin conjugated chitosan (CHI-KGN). Kartogenin, which promotes the selective differentiation of mesenchymal stem cells (MSCs) into chondrocytes, was conjugated with low-molecular-weight chitosan (LMWCS) and medium-molecular-weight chitosan (MMWCS) by covalent coupling of kartogenin to each chitosan using an ethyl(dimethylaminopropyl) carbodiimide (EDC)/N-hydroxysuccinimide (NHS) catalyst. Nanoparticles (NPs, 150 ± 39 nm) or microparticles (MPs, 1.8 ± 0.54 μm) were fabricated from kartogenin conjugated-LMWCS and -MMWCS, respectively, by an ionic gelation using tripolyphosphate (TPP). The in vitro release profiles of kartogenin from the particles showed sustained release for 7 weeks. When the effects of the CHI-KGN NPs or CHI-KGN MPs were evaluated on the in vitro chondrogenic differentiation of human bone marrow MSCs (hBMMSCs), the CHI-KGN NPs and CHI-KGN MPs induced higher expression of chondrogenic markers from cultured hBMMSCs than unconjugated kartogenin. In particular, hBMMSCs treated with CHI-KGN NPs exhibited more distinct chondrogenic properties in the long-term pellet cultures than those treated with CHI-KGN MPs. The in vivo therapeutic effects of CHI-KGN NPs or CHI-KGN MPs were investigated using a surgically-induced OA model in rats. The CHI-KGN MPs showed longer retention time in the knee joint than the CHI-KGN NPs after IA injection in OA rats. The rats treated with CHI-KGN NPs or CHI-KGN MPs by IA injection showed much less degenerative changes than untreated control or rats treated with unconjugated kartogenin. In conclusion, CHI-KGN NPs or CHI-KGN MPs can be useful polymer-drug conjugates as an IA drug delivery system to treat OA.