Osteoarthritis (OA), as a whole-joint degenerative disease, is difficult to reverse cartilage degeneration through traditional treatments. Mesenchymal stem cell-derived exosomes (MSC-Exo) have shown great potential due to their stability, low immunogenicity, and targeted delivery ability. MSC-Exo can delay the progression of OA by regulating the metabolic balance of chondrocytes, enhancing cartilage matrix production, and macrophage polarization, and inhibiting the inflammatory cascade reaction. In recent years, research on engineered exosomes has made breakthroughs, such as optimizing the drug-loading capacity and therapeutic effect of exosomes through targeted peptide modification or nanotechnology, providing new ideas for OA treatment. However, the clinical translation of MSC-Exo still faces many challenges, including the standardization of preparation methods, in-depth analysis of mechanisms of action, and the lack of clinical research data. This article reviewed the application prospects and challenges of MSC-Exo in OA treatment.