Notch signaling is a key mechanism in the control of embryogenesis. However, its in vivo function during mesenchymal cell differentiation, and, specifically, in bone homeostasis, remains largely unknown. Here, we show that osteoblast-specific gain of Notch function causes severe osteosclerosis owing to increased proliferation of immature osteoblasts. Under these pathological conditions, Notch stimulates early osteoblastic proliferation by upregulating the genes encoding cyclin D, cyclin E and Sp7 (osterix). The intracellular domain of Notch1 also regulates terminal osteoblastic differentiation by directly binding Runx2 and repressing its transactivation function. In contrast, loss of all Notch signaling in osteoblasts, generated by deletion of the genes encoding presenilin-1 and presenilin-2 in bone, is associated with late-onset, age-related osteoporosis, which in turn results from increased osteoblast-dependent osteoclastic activity due to decreased osteoprotegerin mRNA expression in these cells. Together, these findings highlight the potential dimorphic effects of Notch signaling in bone homeostasis and may provide direction for novel therapeutic applications.