The aim of this study was to assess the effect of injecting genetically engineered chondrocytes expressing transforming growth factor beta 1 (TGF-β1) into the knees of patients with osteoarthritis. We assessed the resultant function, pain and quality of life. . A total of 54 patients (20 men, 34 women) who had a mean age of 58 years (50 to 66) were blinded and randomised (1:1) to receive a single injection of the active treatment or a placebo. We assessed post-treatment function, pain severity, physical function, quality of life and the incidence of treatment-associated adverse events. Patients were followed at four, 12 and 24 weeks after injection. At final follow-up the treatment group had a significantly greater improvement in the mean International Knee Documentation Committee score than the placebo group (16 points; -18 to 49, vs 8 points; -4 to 37, respectively; p = 0.03). The treatment group also had a significantly improved mean visual analogue score at final follow-up (-25; -85 to 34, vs -11 points; -51 to 25, respectively; p = 0.032). Both cohorts showed an improvement in Western Ontario and McMaster Osteoarthritis Index and Knee Injury and Osteoarthritis Outcome Scores, but these differences were not statistically significant. One patient had an anaphylactic reaction to the preservation medium, but recovered within 24 hours. All other adverse events were localised and resolved without further action. . This technique may result in improved clinical outcomes, with the aim of slowing the degenerative process, leading to improvements in pain and function. However, imaging and direct observational studies are needed to verify cartilage regeneration. Nevertheless, this study provided a sufficient basis to proceed to further clinical testing. Cite this article: Bone Joint J 2015;97-B:924–32