The incomplete understanding of aberrant neovascularization, which contributes to osteoarthritis suggests that additional modulators have yet to be identified. Our objective was to identify the role of Leucine-rich-alpha-2-glycoprotein1 (LRG1), a new regulator of pathogenic angiogenesis, in osteoarthritis progression and to develop effective treatment strategies. In this study, immunohistochemistry showed that LRG1 was increased in the subchondral bone and articular cartilage in anterior cruciate ligament transection (ACLT) mice. Further studies were focused on the role of LRG1 in osteoarthritis. Results showed that LRG1 promoted angiogenesis and mesenchymal stem cells (MSC) migration, which contribute to aberrant bone formation in the subchondral bone. Moreover, tumor necrosis factor-α (TNF-α), not interleukin-1β (IL-1β), IL-6 or IL-17, induced the LRG1 expression in human umbilical vein endothelial cells and this effect was inhibited by p38 mitogen-activated protein kinase or NF-κB inhibitor. Notably, inhibition of TNF-α and LRG1 activity by Lenalidomide, an inhibitor of TNF-α production, in ACLT mice attenuated degeneration of osteoarthritis articular cartilage. This study shows that TNF-α is the predominant proinflammatory cytokine that induces the secretion of LRG1. LRG1 contributes to angiogenesis-coupled de novo bone formation by increasing angiogenesis and recruiting MSCs in the subchondral bone of osteoarthritis joints. Inhibition of TNF-α and LRG1 by Lenalidomide could be a potential therapeutic approach.