Macrophage polarization is a steering factor of osteoarthritis (OA) progression. Synovial fluid (SF) obtained from OA patients with different Kellgren-Lawrence grades (KL grades) holds several proinflammatory factors and was hypothesized to induce macrophage differentiation and polarization by providing the needed microenvironment. U937 cells and peripheral-blood-mononuclear-cell-derived monocytes (PBMC-derived CD14+ cells) were induced with SFs of progressive KL grades for 48 h, and the status of the differentiated cells was evaluated by cell surface markers representing M1 and M2 macrophage phenotypes. Functional viability assessment of the differentiated cells was performed by cytokine estimation. The fraction of macrophages and their phenotypes were estimated by immunophenotyping of SF-isolated cells of different KL grades. A grade-wise proteome analysis of SFs was performed in search of the factors which are influential in macrophage differentiation and polarization. In the assay on U937 cells, induction with SF of KL grade III and IV showed a significant increase in M1 type (CD86+). The percentage of M2 phenotype (CD163+) was significantly higher after the induction with SF of KL grade II. A Significantly higher M1/M2 ratio was estimated in the cells induced with KL grade III and IV. The cell differentiation pattern in the assay on PBMC-derived CD14+ cells showed a grade-wise decline in both M1 (CD11C+, CD86+) and M2 phenotype (CD163+). Cytokine estimation specific to M1 (TNF-α, IL-6, IL-1β, IFN-γ) and M2 (IL-4 and IL-10) macrophages corelated with the differentiation pattern in the U937 cell assay, while it did not reveal any significant changes in the PBMC-derived CD14+ cells assay. SF cells' immunophenotyping showed the highest percentage of CD14+ macrophages in KL grade II; CD86+ and CD163+ cells were minimal in all KL grades' SFs. The proteome analysis revealed significantly expressed MIF, CAPG/MCP, osteopontin, and RAS-related RAB proteins in KL grade III and IV samples, which are linked with macrophages' movement, polarization, and migration-behavior. In conclusion, this study demonstrated that SF in OA joints acts as a niche and facilitates M1 phenotype polarization by providing a proinflammatory microenvironment.Keywords: Kellgren-Lawrence score; M1/M2 ratio; macrophages; niche; osteoarthritis; synovial fluid; synovitis.