To observe the efficacy and safety of Shaoyang Xibi decoction (SYXBD) in patients with knee osteoarthritis (KOA), and to verify that the theory of ""Shaoyang dominating bone"" in Traditional Chinese Medicine (TCM) can be applied to KOA treatment.Participants were randomly allocated to two groups: SYXBD (treatment group, n = 66) and Meloxicam (control group, n = 66). Western Ontario and McMaster Universities Osteoarthritis Index (WOMAC) and 36-Item Short Form Health Survey (SF-36) were used to assess efficacy before the treatment and 8 weeks after the treatment.Baseline data before the treatment between the two groups were similar. The WOMAC scores significantly decreased and the SF-36 scores significantly increased after 8- week treatment in both groups compared with before the treatment (P < 0.05). SYXBD significantly decreased pain scores (P < 0.001), physical function scores (P < 0.001) and the total scores (P < 0.001) in WOMAC compared to Meloxicam. SYXBD significantly improved physical function (P = 0.021), bodily pain (P = 0.002) and general health (P = 0.014), with no significant difference in role emotional (P = 0.053), role physical (P = 0.517), vitality (P = 0.241), social function (P = 0.712) and mental health (P = 0.800) in SF-36 compared to Meloxicam. No adverse events were reported in the treatment group while 13 adverse events happened in the control group during the study.SYXBD, prepared based on the theory of ""Shaoyang dominating bone"", has a better curative efficay and safety in patients with KOA compared with Meloxicam. The TCM theory of ""Shaoyang dominating bone"" may be useful in KOA treatment.