Osteoarthritis is a complex degenerative joint disease. Here, we investigate matched genotype and methylation profiles of primary chondrocytes from macroscopically intact (low-grade) and degraded (high-grade) osteoarthritis cartilage and from synoviocytes collected from 98 osteoarthritis-affected individuals undergoing knee replacement surgery. We perform an epigenome-wide association study of knee cartilage degeneration and report robustly replicating methylation markers, which reveal an etiologic mechanism linked to the migration of epithelial cells. Using machine learning, we derive methylation models of cartilage degeneration, which we validate with 82% accuracy in independent data. We report a genome-wide methylation quantitative trait locus (mQTL) map of articular cartilage and synovium and identify 18 disease-grade-specific mQTLs in osteoarthritis cartilage. We resolve osteoarthritis GWAS loci through causal inference and colocalization analyses and decipher the epigenetic mechanisms that mediate the effect of genotype on disease risk. Together, our findings provide enhanced insights into epigenetic mechanisms underlying osteoarthritis in primary tissues.