Tenoxicam (TNX) is a strong non-steroidal anti-inflammatory drug utilized to manage osteoarthritis. This study aimed to develop chitosan-coated invasomes (CCIs) for TNX transdermal delivery to enhance its solubility, transdermal permeability, and anti-osteoarthritic efficacy. TNX-invasomes were prepared using a thin-film hydration technique according to the 22.31 factorial design. The optimized CCI (OCCI) formula consisted of 100 mg L-alpha-phosphatidylcholine, 25 mg chitosan, and 100 mg limonene. The OCCI formula (F10) showed the minimum vesicle size (192.80 ± 4.60 nm), polydispersity index (0.252 ± 0.03), and maximum entrapment efficiency % (94.19 ± 3.77 %), zeta potential (46.10 ± 3.58 mV), % released after 24 h (86.83 ± 1.41 %), and transdermal flux (61.20 ± 2.35 μg/h.cm2). The OCCI formula showed higher stability compared with the conventional chitosan uncoated formula (F4). The OCCI formula was converted to OCCI gel that boosted TNX release by 2.17-fold compared to free TNX gel. The OCCI gel boosted TNX permeation by 1.61- and 5.27-fold compared to F4 gel and free TNX gel, respectively. In vivo skin irritation test verified the safety of the OCCI gel. Moreover, In vivo studies confirmed that OCCI gel achieved significant inhibition of cyclooxygenase-2 (COX2), prostaglandin E-2 (PGE2), and mitogen-activated protein kinase (MAPK) compared to TNX free gel and oral market tablet. Histopathological data confirmed the OCCI gel's efficacy in cartilage regeneration. Therefore, OCCIs might be regarded as an effective approach for transdermal delivery of TNX to manage OA.