Cartilage degradation is the significant pathological process in osteoarthritis (OA). Inflammatory cytokines, such as interleukin-1β (IL-1β), activate various downstream mediators contributing to OA pathology. Recently, stem cell-based cartilage repair emerges as a potential therapeutic strategy that being widely studied, whereas, the outcome is still far from clinical application. In this study, we focused on an anti-inflammatory agent, honokiol, which is isolated from an herb, investigated the potential effects on human umbilical cord derived mesenchymal stem cells (hUC-MSCs) in IL-1β stimulation. Second passage hUC-MSCs were cultured for multi-differentiation. Flow cytometry, qRT-PCR, von Kossa stain, alcian blue stain and oil red O stain were used for characterization and multi-differentiation determination. Honokiol (5, 10, 25, 50 μM) and IL-1β (10 ng/ml) were applied in hUC-MSCs during chondrogenesis. Analysis was performed by MTT, cell apoptosis evaluation, ELISA assay, qRT-PCR and western blot. hUC-MSC was positive for CD73, CD90 and CD105, but lack of CD34 and CD45. Remarkable osteogenesis, chondrogenesis and adipogenesis were detected in hUC-MSCs. IL-1β enhanced cell apoptosis and necrosis and activated the expression of caspase-3, cyclooxygenase-2 (COX-2), interleukin-6 (IL-6) and matrix metalloproteinase (MMP)-1, −9, 13 in hUC-MSCs. Moreover, the expression of SRY-related high-mobility group box 9 (SOX-9), aggrecan and col2α1 was suppressed. Honokiol relieved these negative impacts induced by IL-1β and suppressed Nuclear factor-κB (NF-κB) pathway by downregulating expression of p-IKKα/β, p-IκBα and p-p65 in dose-dependent and time-dependent manner. Honokiol improved cell survival and chondrogenesis of hUC-MSCs and inhibited IL-1β-induced inflammatory response, which suggested that combination of anti-inflammation and stem cell can be a novel strategy for better cartilage repair.