Osteoarthritis (OA) is characterized by an imbalance between M1 and M2 polarized synovial macrophages. Quercetin has shown protective effects against OA by altering M1/M2-polarized macrophages, but the underlying mechanisms remain unclear. In this study, rat chondrocytes were treated with 10 ng/mL of IL-1β. To create M1-polarized macrophages in vitro, rat bone marrow-derived macrophages (rBMDMs) were treated with 100 ng/mL LPS. To mimic OA conditions observed in vivo, a co-culture system of chondrocytes and macrophages was established. ATP release assays, immunofluorescence assays, Fluo-4 AM staining, Transwell assays, ELISA assays, and flow cytometry were performed. Male adult Sprague–Dawley (SD) rats were used to create an OA model. Histological analyses, including H&E, and safranin O-fast green staining were performed. Our data showed a quercetin-mediated suppression of calcium ion influx and ATP release, with concurrent downregulation of TRPV1 and P2X7 in the chondrocytes treated with IL-1β. Activation of TRPV1 abolished the quercetin-mediated effects on calcium ion influx and ATP release in chondrocytes treated with IL-1β. In the co-culture system, overexpression of P2X7 in macrophages attenuated the quercetin-mediated effects on M1 polarization, migration, and inflammation. Either P2X7 or NLRP3 knockdown attenuated IL-1β-induced M1/M2 polarization, migration, and inflammation. Moreover, overexpression of TRPV1 reduced the quercetin-mediated suppressive effects on OA by promoting M1/M2-polarized macrophages in vivo. Collectively, our data showed that quercetin-induced suppression of TRPV1 leads to a delay in OA progression by shifting the macrophage polarization from M1 to M2 subtypes via modulation of the P2X7/NLRP3 pathway.