In rheumatoid arthritis (RA), synovial inflammation results in focal erosion of articular bone. Despite treatment attenuating inflammation, repair of erosions with adequate formation of new bone is uncommon in RA, suggesting that bone formation may be compromised at these sites. Dynamic bone histomorphometry was used in a murine model of RA to determine the impact of inflammation on osteoblast function within eroded arthritic bone. Bone formation rates at bone surfaces adjacent to inflammation were similar to those observed in nonarthritic bone; therefore, osteoblast activity is unlikely to compensate for the increased bone resorption at these sites. Within arthritic bone, the extent of actively mineralizing surface was reduced at bone surfaces adjacent to inflammation compared with bone surfaces adjacent to normal marrow. Consistent with the reduction in mineralized bone formation, there was a notable paucity of cells expressing the mid- to late stage osteoblast lineage marker alkaline phosphatase, despite a clear presence of cells expressing the early osteoblast lineage marker Runx2. In addition, several members of the Dickkopf and secreted Frizzled-related protein families of Wnt signaling antagonists were upregulated in arthritic synovial tissues, suggesting that inhibition of Wnt signaling could be one mechanism contributing to impaired osteoblast function within arthritic bone. Together, these data indicate that the presence of inflammation within arthritic bone impairs osteoblast capacity to form adequate mineralized bone, thus contributing to the net loss of bone and failure of bone repair at sites of focal bone erosion in RA.