Meniscus injury is frequently encountered in clinical practice. Current surgical therapy involving partial or complete meniscectomy relieves pain in the short-term but often leads to osteoarthritis (OA) in the long-term. Here, this study aimed to identify and characterize a novel population of meniscus-derived stem cells (MeSCs) and develop a new strategy of articular cartilage protection by intra-articular injection of these cells. The “stemness” and immune properties of MeSCs were investigated in vitro, while the efficacy of intra-articular injection of MeSCs for meniscus regeneration and OA prevention were investigated in vivo at 4, 8, and 12 weeks postsurgery. MeSCs displayed typical stem cell characteristics such as low immunogenicity and even possessed immunosuppressive function. In a rabbit meniscus injury model, transplantation of allogenous MeSCs did not elicit immunological rejection, but promoted neo-tissue formation with better-defined shape and more matured extracellular matrix. In a rabbit experimental OA model, transplantation of MeSCs further protected joint surface cartilage and maintained joint space at 12 weeks postsurgery, whereas extensive joint surface irregularities and joint space stenosis were observed in the control group. This study thus evoked a new strategy for articular cartilage protection and meniscus regeneration by intra-articular injection of MeSCs for patients undergoing meniscectomy.