The uncoupling of osteoblastic and osteoclastic activity is central to disorders such as osteoporosis, osteolytic malignancies, and periodontitis. Numerous studies have shown explicit functions for bone morphogenetic proteins (BMPs) in skeletogenesis. Their signaling activity has been shown in various contexts to be regulated by extracellular proteins, including Twisted gastrulation (TWSG1). However, experimental paradigms determining the effects of BMP regulators on bone remodeling are limited. In this study, we assessed the role of TWSG1 in postnatal bone homeostasis. Twsg1-deficient (Twsg1(-/-)) mice developed osteopenia that could not be explained by defective osteoblast function, because mineral apposition rate and differentiation markers were not significantly different compared with wildtype (WT) mice. Instead, we discovered a striking enhancement of osteoclastogenesis in Twsg1(-/-) mice, leading to increased bone resorption with resultant osteopenia. Enhanced osteoclastogenesis in Twsg1(-/-) mice was caused by increased cell fusion, differentiation, and function of osteoclasts. Furthermore, RANKL-mediated osteoclastogenesis and phosphorylated Smad1/5/8 levels were enhanced when WT osteoclasts were treated with recombinant BMP2, suggesting direct regulation of osteoclast differentiation by BMPs. Increase in detectable levels of phosphorylated Smad 1/5/8 was noted in osteoclasts from Twsg1(-/-) mice compared with WT mice. Furthermore, the enhanced osteoclastogenesis in Twsg1(-/-) mice was reversed in vitro in a dose-dependent manner with exposure to Noggin, a BMP antagonist, strongly suggesting that the enhanced osteoclastogenesis in Twsg1 mutants is attributable to increased BMP signaling. Thus, we present a novel and previously uncharacterized role for TWSG1 in inhibiting osteoclastogenesis through regulation of BMP activity.