Recently developed anti-inflammatory drugs, such as rhILIRa, have been shown to modify the progression of the inflammatory joint disease, rheumatoid arthritis. However, due to the significant side effects that presents with the systemic administration or frequent dosing of these drugs, their use for a localized disease, such as osteoarthritis, has not been accepted. Thus, there exists a need to deliver these highly effective protein drugs directly to the joint space, with an associated need to increase their half-life and bioavailability in the joint space. This work describes the development of a novel drug delivery system to enable sustained release of peptides following intra-articular injection that may permit the use of these anti-inflammatory protein drugs. The delivery system utilizes a class of thermally responsive biopolymers called Elastin-like polypeptides (ELPs). The hypothesis underlying this work is that a protein drug attached to ELP will aggregate at the time of intra-articular injection and form a “drug depot” that will slowly disaggregate and release drug into the joint space. To evaluate this, ELPs were recombinantly synthesized and their disaggregation kinetics at body temperature was spectophotometically monitored. The in-vitro observation elucidated that ELP aggregates slowly disaggregates to reach equilibrium between a free and aggregated form, releasing about 15 to 20% of the total ELP into the solution. The feasibility of the delivery system to function in-vivo was further evaluated by injecting an aggregating ELP and nonaggregating ELP into a rat knee. The biodistribution studies revealed that the aggregating ELP has a 24-fold longer joint half-life than the non-aggregating form and neither protein preferentially accumulate in peripheral tissues. Finally, fusion proteins of ELPs and ILIRa were synthesized and the fusion proteins exhibit a nanomolar level affinity to the IL-1 receptor and a bioactivity within one order of magnitude of commercial rhIL-IRa levels. This work reports that the intra-articular delivery of ELP-based fusion proteins maybe a viable strategy for the prolonged release of anti-inflammatory protein drugs for osteoarthritis. Furthermore, the work provides a foundation for further development and optimization of thermally responsive biopolymer based protein drug delivery system for localized treatment of osteoarthritis.