Extract of the whole plant, Ajuga decumbens (KE) has long been used in China as a medication for the relief of joint pain. Previously, we proved that KE up-regulated the synthesis of collagen in false aged model rats. In this paper we examined the effects of KE on nitric oxide (NO) production, expression of inducible nitric oxide synthase (iNOS), osteoblast and osteoclast activity. We also investigated whether KE had any anti-osteoporosis or anti-arthritic activity by using ovariectmized mice and adjuvant induced arthritic rats. KE exhibited down-regulation of differentiation into osteoclast and up-regulation of mineralization in osteoblast-like MC3T3-E1 cells in a concentration-dependent manner. NO synthesized by iNOS plays important roles in inflammatory disease and imbalance between bone resorption and bone formation caused by estrogen depletion. KE inhibited expression of iNOS which caused concentration dependent inhibition of NO production. Furthermore, KE prevented brittle bones in ovariectomized mice and swelling of the left hind ankle in adjuvant induced arthritic rats. Therefore, KE improved the balance of bone resorption and bone formation, showing anti-inflammatory effects. Consequently, KE is beneficial for sufferers of bone and joint disease.