Increased permeability and growth (angiogenesis) of blood vessels play a key role in joint swelling and pannus formation in inflammatory arthritis, a family of diseases influenced by reproductive hormones. The hormone prolactin (PRL) protects against joint inflammation, pannus formation, and bone destruction in adjuvant-induced arthritis and these effects may involve its proteolytic conversion to vasoinhibin, a PRL fragment that inhibits angiogenesis and vasopermeability. Here, we show that the intra-articular injection of an adeno-associated virus type-2 (AAV2) vector encoding vasoinhibin reduced joint inflammation, the hyperplasia, vascular density, and vasopermeability of the pannus, and the loss of bone in mice subjected to antigen-induced arthritis. In agreement, the AAV2 vasoinhibin vector reduced the expression of proinflammatory cytokines (interleukin-1β, interleukin-6), an endothelial cell marker (platelet endothelial cell-adhesion molecule 1), and proangiogenic molecules [vascular endothelial growth factor (VEGF), VEGF receptor 2, and hypoxia-inducible factor 1α] in the arthritic joint. Also, vasoinhibin reduced the synovial vasopermeability induced by the intra-articular injection of VEGF in healthy mice. Finally, vasoinhibin signals by blocking the phosphorylation/activation of endothelial nitric oxide synthase (eNOS) at Ser1179 and the AAV2 vasoinhibin vector inhibited the enhanced phosphorylation of eNOS Ser1179 in the arthritic joint. We conclude that vasoinhibin reduces joint inflammation and bone loss in arthritis by inhibiting pannus angiogenesis and vasopermeability via the blockage of VEGF-induced eNOS activation. These findings suggest the potential therapeutic benefit of AAV2-mediated vasoinhibin gene delivery in arthritis.