Objective Inflammatory mediators, such as prostaglandin E2 (PGE2) and interleukin-1β (IL-1β), are produced by osteoarthritic (OA) joint tissue, where they may contribute to disease pathogenesis. We undertook the present study to examine whether inflammation, evidenced in plasma and peripheral blood leukocytes (PBLs), reflects the presence, progression, or specific symptoms of symptomatic knee OA. Methods Patients with symptomatic knee OA were enrolled in a 24-month prospective study of radiographic progression. Standardized knee radiographs were obtained at baseline and 24 months. At baseline, levels of the plasma lipids PGE2 and 15-hydroxyeicosatetraenoic acid (15-HETE) were measured, and transcriptome analysis of PBLs was performed by microarray and quantitative polymerase chain reaction. Results Baseline PGE2 synthase (PGES) levels determined by PBL microarray gene expression and plasma PGE2 levels distinguished patients with symptomatic knee OA from non-OA controls (area under the receiver operating characteristic curve [AUC] 0.87 and 0.89, respectively, P < 0.0001). Baseline plasma 15-HETE levels were significantly elevated in patients with symptomatic knee OA versus non-OA controls (P < 0.0195). In the 146 patients who completed the 24-month study, elevated baseline expression of IL-1β, tumor necrosis factor α, and cyclooxygenase 2 (COX-2) messenger RNA in PBLs predicted higher risk of radiographic progression as evidenced by joint space narrowing (JSN). In a multivariate model, AUC point estimates of models containing COX-2 in combination with demographic traits overlapped the confidence interval of the base model in 2 of the 3 JSN outcome measures (JSN >0.0 mm, JSN >0.2 mm, and JSN >0.5 mm; AUC 0.62-0.67). Conclusion The inflammatory plasma lipid biomarkers PGE2 and 15-HETE identify patients with symptomatic knee OA, and the PBL inflammatory transcriptome identifies a subset of patients with symptomatic knee OA who are at increased risk of radiographic progression. These findings may reflect low-grade inflammation in OA and may be useful as diagnostic and prognostic biomarkers in clinical development of disease-modifying OA drugs.