Polyvinylpyrrolidone-iodine (Povidone-iodine, PVP-I) is widely used as an antiseptic agent for lavation during joint surgery; however, the biological effects of PVP-I on cells from joint tissue are unknown. This study examined the biocompatibility and biological effects of PVP-I on cells from joint tissue, with the aim of optimizing cell-scaffold based joint repair. Cells from joint tissue, including cartilage derived progenitor cells (CPC), subchondral bone derived osteoblast and bone marrow derived mesenchymal stem cells (BM-MSC) were isolated. The concentration-dependent effects of PVP-I on cell proliferation, migration and differentiation were evaluated. Additionally, the efficacy and mechanism of a PVP-I loaded bilayer collagen scaffold for osteochondral defect repair was investigated in a rabbit model. A micromolar concentration of PVP-I was found not to affect cell proliferation, CPC migration or extracellular matrix production. Interestingly, micromolar concentrations of PVP-I promote osteogenic differentiation of BM-MSC, as evidenced by up-regulation of RUNX2 and Osteocalcin gene expression, as well as increased mineralization on the three-dimensional scaffold. PVP-I treatment of collagen scaffolds significantly increased fibronectin binding onto the scaffold surface and collagen type I protein synthesis of cultured BM-MSC. Implantation of PVP-I treated collagen scaffolds into rabbit osteochondral defect significantly enhanced subchondral bone regeneration at 6 weeks post-surgery compared with the scaffold alone (subchondral bone histological score of 8.80±1.64 vs. 3.8±2.19, p<0.05). The biocompatibility and pro-osteogenic activity of PVP-I on the cells from joint tissue and the enhanced subchondral bone formation in PVP-I treated scaffolds would thus indicate the potential of PVP-I for osteochondral defect repair.