Over the last two decades, affirmative diagnoses of osteoarthritis in the United States have tripled due to increasing rates of obesity and an aging population. Hemp-derived cannabidiol (CBD) is the major non-THC component of cannabis and has been promoted as a potential treatment for a wide variety of disparate inflammatory conditions. Here we evaluated CBD for its ability to modulate the production of pro-inflammatory cytokines in vitro and in murine models of induced inflammation and further validated the ability of a liposomal formulation to increase bioavailability in mice and in humans. Subsequently, the therapeutic potential of both naked and liposomally-encapsulated CBD was explored in a 4-week, randomized placebo-controlled, double-blinded study in a spontaneous canine model of osteoarthritis. In vitro and in mouse models, CBD significantly attenuated the production of pro-inflammatory cytokines IL-6 and TNF-α while elevating levels of anti-inflammatory IL-10. In the veterinary study, CBD significantly decreased pain and increased mobility in a dose-dependent fashion among animals with an affirmative diagnosis of osteoarthritis. Liposomal CBD (20 mg/day) was as effective as the highest dose of non-liposomal CBD (50 mg/day) in improving clinical outcomes. Hematocrit, comprehensive metabolic profile, and clinical chemistry indicated no significant detrimental impact of CBD administration over the four-week analysis period. This study supports the safety and therapeutic potential of hemp-derived CBD for relieving arthritic pain and suggests follow-up investigations in humans is warranted.