The molecular pathways regulating cartilage degradation are unclear. miR-381 was identified as a putative regulator of chondrogenesis related genes. Here, we examined its role in chondrogenesis and osteoarthritic cartilage degeneration. miR-381 expression was assessed in vitro in response to IL-1β stimulation in primary human (PHC) and mouse (PMC) chondrocytes, and ATDC5 derived chondrocytes; and in vivo in mouse embryos and human osteoarthritic cartilage. The effects of miR-381 on chondrogenesis and NF-kB signaling were assessed using a synthetic RNA mimic or inhibitor and luciferase assay, respectively. Upstream regulators of miR381 were probed using siRNA or overexpression plasmids for Sox9 and Runx2. miR-381 expression was elevated in chondrogenic and hypertrophic ATDC5 cells. miR-381 was induced in vitro by IL-1β in ATDC5 cells, PMCs, and PHCs, and was expressed in areas of cartilage degradation or absorption in vivo. Overexpression of Runx2 or Sox9 increased miR-381 expression in ATDC5 cells. miR-381 suppressed expression of collagen, type II, alpha 1, and enhanced expression of metalloproteinase-13 (MMP-13), but did not regulate NFKBIA and NKRF activity. miR-381 was highly expressed during chondrogenesis and in arthritic cartilage. It may contribute to absorption of the cartilage matrix by repressing type II collagen and inducing MMP-13.