The objective of this study was to evaluate the efficacy and safety of diacerein in early, symptomatic knee osteoarthritis in Indian population. Sixty-four patients of knee osteoarthritis fulfilling American College of Rheumatology Criteria were randomized to receive either diacerein or placebo for 8 weeks, followed by 4 weeks "treatment-free" follow-up in this single-blind, parallel group, post-marketing trial. Primary efficacy variable was visual analogue scale (VAS) assessment of pain on movement; secondary efficacy variables included Western Ontario and Mc Master Universities Osteoarthritis Index (WOMAC) subscores for stiffness and physical function, rescue medication use and physician's clinical global impression (CGI). Compared to placebo, diacerein showed highly significant (p < 0.01) reductions in VAS pain scores, significant (p < 0.05) reductions in WOMAC physical function scores, significantly lower requirement for rescue medication, and significantly better CGI grades. Incidence of adverse events were significantly (p < 0.01) higher in diacerein arm with urine discoloration and soft stool being the most common ones. However, most events were of mild to moderate intensity. In Indian patients with knee osteoarthritis, diacerein effectively reduces pain and improves physical function, and despite frequent adverse events, overall tolerability seemed to be good.