Rheumatoid arthritis (RA) is an autoimmune disease characterized by synovial inflammation leading to bone and cartilage damage in the joints. Th17 cells play a vital role in arthritis induction and progression. However, there is limited information about the relative proportion of Th17 and regulatory cells (Treg) in the target organ, the inflamed joint. We determined the frequency of Th17 and Treg in the joints of rats with adjuvant arthritis (AA), an experimental model of human RA. We also investigated the impact of Celastrol, a bioactive component of the traditional Chinese medicine Celastrus aculeatus, on the Th17/Treg balance in the synovial-infiltrating cells (SIC) of arthritic rats. Lewis rats were treated either with Celastrol or the vehicle daily for 9 d beginning at the onset of AA. The severity of arthritis was assessed clinically and histologically, and the SIC were examined by flow cytometry. Celastrol treatment reduced Th17 cells, but increased Treg in the SIC. The in vitro assay for T cell differentiation in the presence of specific cytokines revealed that Celastrol inhibited Th17, but promoted Treg differentiation by blocking the activation of pSTAT3 (T cell-intrinsic effect). Further, Celastrol limited the production of primary Th17-differentiating cytokines (IL-6 and IL-1β), pro-inflammatory chemokines (CCL3 and CCL5), and stimulatory receptors (MHCII and CD80) on spleen adherent cells and SIC. These T cell-extrinsic effects comprise additional anti-arthritic mechanisms of action of Celastrol. Our results support the rationale for testing Celastrol as a potential adjunct/alternative to conventional drugs for the treatment of human RA.