Transglutaminase 2 (TG2), also known as tissue transglutaminase, is a calcium-dependent enzyme that has a variety of intracellular and extracellular substrates. TG2 not only increases in osteoarthritis (OA) tissue but also affects the progression of OA. However, it is still unclear how TG2 affects cartilage degradation in OA at the molecular level. Surgically induced OA lead to an increase of TG2 in the articular cartilage and growth plate, and it was dependent on TGFβ1 in primary chondrocytes. The inhibition of TG2 enzymatic activity with intra-articular injection of ZDON, the peptide-based specific TG2 inhibitor, ameliorated the severity of surgically induced OA as well as the expression of MMP-3 and MMP-13. ZDON attenuated MMP-3 and MMP-13 expression in TGFβ- and calcium ionophore-treated chondrocytes in a Runx2-independent manner. TG2 inhibition with ZDON suppressed canonical Wnt signaling through a reduction of β-catenin, which was mediated by ubiquitination-dependent proteasomal degradation. In addition, TG2 activation by a calcium ionophore enhanced the phosphorylation of AMPK and FoxO3a and the nuclear translocation of FoxO3a, which was responsible for the increase in MMP-13. In conclusion, TG2 plays an important role in the pathogenesis of OA as a major catabolic mediator that affects the stability of β-catenin and FoxO3a-mediated MMP-13 production.