Multiple head-to-head trials have demonstrated that topical nonsteroidal anti-inflammatory drugs (NSAIDs), including topical diclofenac, provide at least equivalent analgesia, improvement in physical function, and reduction of stiffness compared with oral NSAIDs in osteoarthritis and have fewer systemic adverse events. While efficacy of topical diclofenac in osteoarthritis is well established, understanding of the time to onset of action, duration of effect, and the minimum effective concentration is limited. Factors likely to influence these parameters include drug penetration and localization. Diclofenac concentrations in the joint tissues are likely to be more relevant than plasma concentrations. However, although diclofenac penetrates and is retained in these "effect compartments" at the site of inflammation and drug activity, no specific minimum effective concentration of diclofenac in plasma or synovial tissue has been identified. Recent evidence suggests that a reduction in inflammatory markers may be a better predictor of efficacy than plasma concentrations. This narrative review explores existing evidence in these areas and identifies the gaps where further research is needed. Based on our findings, topical NSAIDs such as diclofenac should be considered as a guideline-supported, generally well-tolerated, and effective first-line treatment option for knee and hand OA, especially for older patients and those who have comorbid conditions and/or risk factors for various systemic (gastrointestinal, hepatic, renal, or cardiovascular) adverse events associated with oral NSAIDs, particularly at high doses and with long-term use.