Purpose The surgical stress of total knee arthroplasty (TKA) procedure and the application of intra‐operative pneumatic thigh tourniquet increases local fibrinolytic activity, which contributes significantly to post‐operative blood loss. Tranexamic acid, an antifibrinolytic drug, is commonly used to control post‐operative blood loss. The recommended mode of administration of tranexamic acid is either oral or intravenous. However, the mechanism of action of the tranexamic acid points towards the possible effectiveness it may have following local/intra‐articular application. This prospective, double‐blinded, randomized preliminary study evaluated the efficacy of intra‐articular tranexamic acid in reducing TKA‐associated post‐operative blood loss. Methods Fifty consenting patients with osteoarthritis of the knee scheduled for primary unilateral cemented‐TKA were randomly allocated to one of the two groups: Tranexamic Acid (TA) group (n = 25, 500 mg/5 ml tranexamic acid) and the control group (n = 25, 5 ml 0.9% saline). The drug and control solution were administered intra‐articularly through the drain tube immediately after the wound closure. Parameters related to blood loss (drop in haemoglobin, haematocrit differential) and the drain output [volume (ml)] were compared between the two groups. Results On a comparative basis, TA‐group obtained significant reduction in the drain output [95% CI: 360.41–539.59, p < 0.001] at 48 h post‐operatively. Even though the control group received sixfold more blood transfusion than TA‐group, it showed a greater drop in haemoglobin and haematocrit (p < 0.05). Conclusions Local application of tranexamic acid seems to be effective in reducing post‐TKA blood loss as well as blood transfusion requirements. Level of evidence Therapeutic study, Level II.