Intra-articular injection of therapeutics is an effective strategy for treating osteoarthritis (OA), but it is hindered by rapid drug diffusion, thereby necessitating high-frequency injections. Hence, the development of a biofunctional hydrogel for improved delivery is required. In this study, we introduce a liposome-anchored teriparatide (PTH (1–34)) incorporated into a gallic acid-grafted gelatin injectable hydrogel (GLP hydrogel). We show that the GLP hydrogel can form in situ and without affecting knee motion after intra-articular injection in mice. We demonstrate controlled, sustained release of PTH (1–34) from the GLP hydrogel. We find that the GLP hydrogel promotes ATDC5 cell proliferation and protects the IL-1β-induced ATDC5 cells from further OA progression by regulating the PI3K/AKT signaling pathway. Further, we show that intra-articular injection of hydrogels into an OA-induced mouse model promotes glycosaminoglycans synthesis and protects the cartilage from degradation, supporting the potential of this biomaterial for OA treatment.