Ongoing efforts to search for naturally occurring, bioactive substances for the amelioration of arthritis have led to the discovery of natural products with substantial bioactive properties. The seahorse (Hippocampus kuda Bleeler), a telelost fish, is one source of known beneficial products, yet has not been utilized for arthritis research. In the present work, we have purified and characterized a bioactive peptide from seahorse hydrolysis. Among the hydrolysates tested, pronase E-derived hydrolysate exhibited the highest alkaline phosphatase (ALP) activity, a phenotype marker of osteoblast and chondrocyte differentiation. After its separation from the hydrolysate by several purification steps, the peptide responsible for the ALP activity was isolated and its sequence was identified as LEDPFDKDDWDNWK (1821Da). We have shown that the isolated peptide induces differentiation of osteoblastic MG-63 and chondrocytic SW-1353 cells by measuring ALP activity, mineralization and collagen synthesis. Our results indicate that the peptide acts during early to late stages of differentiation in MG-63 and SW-1353 cells. We also assessed the concentration dependence of the peptide's inhibition of MMP (-1, -3 and -13), iNOS and COX-2 expression after treatment with 12-O-tetradecanoylphorbol-13-acetate (TPA), a common form of phorbol ester. The peptide also inhibited NO production in MG-63 and SW-1353 cells. To elucidate the mechanisms by which the peptide acted, we examined its effects on TPA-induced MAPKs/NF-kappaB activation and determined that the peptide treatment significantly reduced p38 kinase/NF-kappaB in MG-63 cells and MAPKs/NF-kappaB in SW-1353 cells.