Objective To investigate the efficacy of warming needle moxibustion combined with traditional Chinese medicine herbal fumigation in the treatment of knee osteoarthritis (KOA) of wind-cold-dampness bi syndrome, and to analyze the effects of the combined therapy on patients' inflammatory factors in synovial fluid. Methods A total of 72 patients with KOA of wind-cold-dampness bi syndrome were enrolled and randomly divided into two groups, with 36 cases in each group. The control group received oral administration of etoricoxib tablets, based on which the observation group received additional warming needle moxibustion combined with traditional Chinese medicine herbal fumigation, and both groups were treated for 4 weeks. The Visual Analogue Scale (VAS) score for pain; the Western Ontario and McMaster Universities Osteoarthritis Index (WOMAC) dimension scores for joint pain, stiffness, and physical function; and the levels of C-reactive protein (CRP), tumor necrosis factor (TNF)-α, and interleukin (IL)-1β in synovial fluid were compared between the two groups before and after treatment, as well as the clinical efficacy. Results Before treatment, there were no statistically significant differences between the two groups in the VAS score for pain, WOMAC dimension scores, or levels of CRP, TNF-α, and IL-1β in synovial fluid (all P>0.05). After 4 weeks of treatment, the VAS score for pain, WOMAC dimension scores, and levels of CRP, TNF-α, and IL-1β in synovial fluid decreased in both groups compared with before treatment, and the above scores and indicators in the observation group were lower than those in the control group (all P<0.05); the total effective rate in the observation group was higher than that in the control group, and the efficacy grade of the observation group was superior to that of the control group (all P<0.05). Conclusion Warming needle moxibustion combined with traditional Chinese medicine herbal fumigation can effectively alleviate knee pain and stiffness and improve joint function in patients with KOA of wind-cold-dampness bi syndrome. Its mechanism may be associated with inhibition of pro-inflammatory cytokine secretion and blockade of nuclear factor-κB pathway-mediated cartilage matrix degradation.