Hemp-derived cannabidiol (CBD) is the major non-psychoactive component of cannabis and has been promoted as a potential treatment for a wide variety of disparate inflammatory conditions. Here we evaluated CBD for its ability to modulate the production of pro-inflammatory cytokines in vitro and in murine models of induced inflammation and further validated the ability of a liposomal formulation to increase bioavailability in mice and in humans. Subsequently, the therapeutic potential of both naked and liposomally-encapsulated CBD was explored in a 4-week, randomized placebo-controlled, double-blinded study in a spontaneous canine model of osteoarthritis. In vitro and in mouse models, CBD significantly attenuated the production of pro-inflammatory cytokines IL-6 and TNF-a while elevating levels of anti-inflammatory IL-10. In the veterinary study, CBD significantly decreased pain and increased mobility in a dose-dependent fashion among animals with an affirmative diagnosis of osteoarthritis. Liposomal CBD (20 mg/day) was as effective as the highest dose of non-liposomal CBD (50 mg/day) in improving clinical outcomes. Hematocrit, comprehensive metabolic profile, and clinical chemistry indicated no significant detrimental impact of CBD administration over the four week analysis period. This study supports the safety and therapeutic potential of hemp-derived CBD for relieving arthritic pain and suggests follow-up investigations in humans is warranted.