BACKGROUND: Shaoyao Gancao Decoction (SGD) is a classic and representative oral administration of traditional Chinese medicine formula. It is composed of two Chinese herbal medicines, Paeoniae Radix Alba [Paeonia lactiflora Pall] and Glycyrrhizae Radix et Rhizoma. The clinical study found SGD could effectively reduce clinical symptoms and improve the level of inflammation in osteoarthritis (OA) patients. PURPOSE: The aim of this study is to identify the efficacy and molecular mechanism of SGD in the treatment of OA, and find the new therapeutic target through RNA sequencing (RNA-Seq) to provide theoretical support for its clinical application. METHODS: Destabilization of the medial meniscus (DMM) OA rat model was established in vivo. Hematoxylineosin staining, safranin O/fast green staining and immunohistochemistry were used to observe changes of cartilage Histology and extracellular matrix (ECM) of cartilage cells. In vitro, the chondrocyte-like cells were derived from ATDC5 cells and induced by interleukin-1 beta to establish the model. The medial meniscotibial ligament (MTT) test was used to identify the effects of SGD on chondrocyte-like cell proliferation, and immunocytochemistry was used to assess changes in chondrocyte ECM. The differentially expressed genes (DEGs) were obtained by RNA-Seq. Meanwhile, the core targets were found through bioinformatics analysis, and then verified by qRT-PCR and Western Blotting. The inflammatory factors IL-1β, IL-6 and TNF-α were detected by ELISA. RESULTS: SGD could alleviate cartilage degeneration, and reduce ECM degradation in OA by upregulating COL2A1 and downregulating MMP-13. 120 key targets were screened from DEGs by RNA-Seq. Based on further bioinformatics analysis, interleukin 17 receptor B (IL-17RB), interleukin 23 receptor and growth differentiation factor 5 were finally selected as core targets. IL-17RB has rarely been reported in previous studies about OA, and worthy of further study. Subsequently, it was found that the gene and protein expressions of IL-17RB were significantly reversed in model group after SGD treatment. Moreover, SGD could inhibit the release of inflammatory factors by mediating IL-17RB in OA. CONCLUSIONS: SGD reduced the release of inflammatory factors IL-1β, IL-6 and TNF-α, upregulated COL2A1 and downregulated MMP-13 to alleviate degradation of ECM, and reduced the cartilage degeneration and progression of OA by reducing IL-17RB in articular cartilage.