In the study, half of 351 participants aged over 45 suffering with meniscus tears or osteoarthritis were randomly selected to undergo knee arthroscopy with the other half getting several weeks of physical therapy.
After six and 12 months, the knee function of participants was assessed and showed similar levels of improvement, according to findings published in the New England Journal of Medicine.
The lead author of the research, Jeffrey Katz, Professor of Medicine and Orthopedic Surgery at Harvard University, said the study suggested there was "no single 'best' treatment."
"Since both the patients who received physical therapy and those who received surgery had similar and considerable improvements in function and pain, our research shows ... there is no single 'best' treatment," Katz said.
"Patients who wish to avoid surgery can be reassured that physical therapy is a reasonable option, although they should recognize that not everyone will improve with physical therapy alone."
He noted that one third of patients who received physical therapy ultimately elected to have surgery, often because their conditions had not improved with therapy alone.
More than 450,000 arthroscopies are performed each year in the United States, commonly for treating meniscus tears.
The cost of the operation is around $4,500 compared to around $2,000 for a course of physical therapy.