High bone mass diseases are caused both by activating mutations in the Wnt pathway and by loss of SOST, a bone morphogenetic protein (BMP) antagonist, leading to the activation of BMP signaling. Given the phenotypic similarity between mutations that activate these signaling pathways, it seems likely that BMPs and Wnts operate in parallel or represent components of the same pathway, modulating osteoblast differentiation. In this study, we show that in C3H10T1/2 cells, Wnt-3A and BMP-6 proteins were inducers of osteoblast differentiation, as measured by alkaline phosphatase (ALP) induction. Surprisingly, sclerostin, noggin, and human BMP receptor 1A (BMPR1A)-FC fusion proteins blocked Wnt-3A-induced ALP as well as BMP-6-induced ALP activity. Dkk-1, a Wnt inhibitor, blocked Wnt-induced ALP activity but not BMP-induced ALP activity. Early Wnt-3A signaling as measured by beta-catenin accumulation was not affected by the BMP antagonists but was blocked by Dkk-1. Wnt-3A induced the appearance of BMP-4 mRNA 12 h prior to that of ALP in C3H10T1/2 cells. We propose that sclerostin and other BMP antagonists do not block Wnt signaling directly. Sclerostin blocks Wnt-induced ALP activity by blocking the activity of BMP proteins produced by Wnt treatment. The expression of BMP proteins in this autocrine loop is essential for Wnt-3A-induced osteoblast differentiation.