Arthroscopy is a useful tool in the diagnosis of osteoarthritis. It is an excellent method for assessing the condition of the articular cartilage surfaces, the menisci, and the synovium. Its role in the management of osteoarthritis, however, has been more controversial. Despite earlier inconsistent results, arthroscopic management of degenerative arthritis of the knee has become an attractive alternative to osteotomy or total knee arthroplasty, at least partly because it is associated with lower costs and lower morbidity. Although it is clear that arthroscopic intervention does not alter the course of the osteoarthritic process, several reliable predictors of outcome have been delineated. Knees with varus or valgus deformity do worse than those without deformity. Patients with mechanical symptoms of relatively short duration will, statistically, fare better than those with chronic, persistent pain. Knees that have undergone previous arthroscopy do not do as well as those having first-time surgery. Knees with early-stage degenerative disease fare better than those with advanced disease. However, no evidence indicates that arthroscopic procedures can predictably serve as long-term treatment options in the management of the arthritic knee.