The goal of this study was to determine whether hyaluronic acid (HA) or progressive knee exercises (PE) can improve functional parameters in patients with osteoarthritis (OA) of the knee. In a prospective clinical trial 200 knees (105 patients) with radiographic Kellgren Lawrence grade III OA were randomized and received either three intra-articular injections of hyaluronic acid (Hylan G-F 20) at one-week intervals or PE for 6 weeks. Patients were evaluated by use of the Hospital for Special Surgery (HSS) Knee Score and followed-up for 18 months. Total HSS score for HA and PE patients improved from 62.6 +/- 13.8 to 88.8 +/- 11.1 and from 65.4 +/- 12.3 to 88.3 +/- 9.1, respectively, at the end of the trial (P < 0.01). There were no statistically significant differences between the groups. Twenty-one patients of the HA group were excluded from the study because they had received another form of therapy. All patients in the PE group completed the trial. The patients who dropped out had also significant improvement from 57.0 +/- 12.9 to 76.7 +/- 11.9 (P < 0.01). This prospective randomized trial confirmed that both HA injections and PE result in functional improvement. HA injections also increase the levels of satisfaction of the OA patients.