Osteoarthritis (OA) is one of the world's most common degenerative diseases, but there is no disease-modifying treatment available. Previous studies have shown that prostaglandin E2 (PGE2) and PGE2 receptor 4 (EP4) are involved in OA pathogenesis; however, their roles are not fully understood. Here, we examined the efficacy of oral administration of KAG-308, an EP4-selective agonist, in surgically induced mouse knee OA. Cartilage degeneration and synovitis were significantly inhibited by the KAG-308 treatment. Chondrocyte hypertrophy and expression of tumor necrosis factor alpha (TNF) and matrix metalloproteinase 13 (Mmp13) in the synovium were suppressed in the KAG-308-treated mice. In cultured chondrocytes, hypertrophic differentiation was inhibited by KAG-308 and intranuclear translocation of histone deacetylase 4 (Hdac4) was enhanced. In cultured synoviocytes, lipopolysaccharide (LPS)-induced expression of TNF and Mmp13 was also suppressed by KAG-308. KAG-308 was detected in the synovium and cartilage of orally treated mice. TNF secretion from the synovia of KAG-308-treated mice was significantly lower than control mice. Thus, we conclude that oral administration of KAG-308 suppresses OA development through suppression of chondrocyte hypertrophy and synovitis. KAG-308 may be a potent candidate for OA drug development.