This study establishes a functional knee-joint coordinate system (FCS) derived from active motion. The scale invariant properties of helical axes were used in order to avoid inter-observer errors associated with the traditional anatomical referencing techniques. The algorithm was tested with six cadaveric specimens in a knee-joint motion and loading apparatus. To determine the FCS sensitivity to variable loading, rotational moments were applied to the tibia while extending and flexing the knee. Each derived FCS was compared with the clinically derived anatomical coordinate system (ACS). The FCS was reproducible when the loading condition was the same. Changing the rotational moments from internal to external affected the orientations and the positions of the FCS. The largest displacement of 20.8 mm in average occurred in the medio/lateral direction. The FCS corresponded with the ACS for all specimens and loading conditions. The origin was always located within the femur along the transepicondylar line. The orientations differed less than 16.6 degrees in average, thus allowing the use of clinical terminology. These findings suggest that the FCS might improve the ability to clinically assess kinematic alterations provided that the reference motion is reproducible.