The anti-osteoarthritic activity of the methanol fraction of deer bone oil extract (DBO-M) was evaluated in interleukin (IL)-1β-inflamed primary rabbit chondrocytes and in rats with monosodium iodoacetate (MIA)-induced osteoarthritis. The active compound in DBO-M was analyzed using a direct infusion liquid chromatography quadrupole (LCQ) ion-trap electrospray ionization (ESI)-mass spectrometer (MS). DBO-M significantly suppressed the IL-1β-induced sulfated-glycosaminoglycan (s-GAG) release from chondrocyte, and lowered mRNA levels of the collagen-degrading enzymes matrix metalloproteinase (MMP)-1 and MMP-3 in a dose-dependent manner. Upon treatment with high doses of DBO-M, the levels of IL-1β, tumor necrosis factor (TNF)-α, and IL-6 decreased by around 40, 70, and 50%, respectively, compared to the control in the serum of rats with MIA-induced osteoarthritis. Bone volume fraction (BV/TV) and trabecular thickness (Tb.Th) increased by over 40% in rats treated with DBO-M compared to the values reported for the MIA-treated control group, while trabecular separation (Tb.Sp) showed a significant decrease (ca. 38%), as confirmed through micro-computed tomography (CT) analysis of MIA-induced destruction of articular bones. Furthermore, direct infusion ESI-MS analysis showed that DBO-M contains gangliosides, which are glycosphingolipids with monosialic acid (GM3), as a major compound. Our results suggest that DBO-M effectively improves MIA-induced osteoarthritis by suppressing inflammatory responses, and that gangliosides could be one of the DBO-derived anti-inflammatory components.