While topical non-steroidal anti-inflammatory drugs are considered safe, their long-term efficacy for osteoarthritis has been suspect. We conducted a 12-week, double-blind, double-dummy, randomized controlled trial of topical diclofenac (TDiclo) in a vehicle solution containing dimethyl sulfoxide (DMSO) in 775 subjects with radiologically confirmed, symptomatic primary osteoarthritis of the knee. This 5-arm study compared TDiclo with a placebo solution, the DMSO vehicle, oral diclofenac (ODiclo) and the combination of TDiclo+ODiclo for relieving the signs and symptoms of knee osteoarthritis. Subjects applied study solution, 40 drops four times daily, and took one study tablet daily for 12 weeks. Co-primary efficacy variables were WOMAC pain and physical function and a patient overall health assessment. Secondary variables were WOMAC stiffness and patient global assessment (PGA) of the knee osteoarthritis. TDiclo was superior to placebo for pain (-6.0 vs. -4.7, P=0.015), physical function (-15.8 vs. -12.3, P=0.034), overall health (-0.95 vs. -0.37, P<0.0001), and PGA (-1.36 vs. -1.01, P=0.016), and was superior to DMSO vehicle for all efficacy variables. No significant difference was observed between DMSO vehicle and placebo or between TDiclo and ODiclo. The commonest adverse event associated with TDiclo was dry skin (18.2%). Fewer digestive system and laboratory abnormalities were observed with TDiclo than with ODiclo. Addition of TDiclo to ODiclo did not increase the incidence of systemic adverse events. TDiclo in DMSO vehicle is an effective treatment option for knee osteoarthritis with efficacy similar to, but tolerability better than ODiclo. DMSO vehicle was no more efficacious than placebo.