Objective To explore the clinical efficacy of orthopedic fumigation medicine in the treatment of knee osteoarthritis with rheumatic stasis syndrome and its influence on knee joint function and inflammatory factor level, so as to provide basis for clinical treatment of this disease. Methods 56 patients with knee osteoarthritis treated in Jinan City Hospital Integrated Traditional Chinese and Western Medicine from January to December 2021 were selected and divided into control group and study group according to random number table method, 28 patients in each group. The patients in the control group were treated with oral celecoxib capsules, while the patients in the study group were treated with traditional Chinese medicine fumigation on the basis of the control group. The TCM syndrome score, knee joint function score, serum inflammatory factors and cartilage repair factors were compared between the two groups before and after treatment. Results Compared with before treatment, the TCM syndrome scores, Lequesne knee osteoarthritis severity index scores, the levels of the serum C-reactive protein (CRP) and interleukin-1β (IL-1β), interleukin-6 (IL-6), tumor necrosis factor- α (TNF-α) of the two groups after treatment all decreased, and the study group was lower than the control group; the levels of the serum fibroblast growth factor-2 (FGF-2), transforming growth factor-β (TGF-β), insulin like growth factor-1 (IGF-1) all increased, and the study group was higher than the control group (all P<0.05). Conclusion The combination of orthopedic fumigation medicine and celecoxib in the treatment of knee osteoarthritis with rheumatic stasis syndrome can effectively reduce inflammatory reaction, relieve pain, improve the knee joint function of patients, and improve clinical effect.