Skeletal cells synthesize bone morphogenetic proteins (BMPs) and BMP antagonists. Noggin is a glycoprotein that binds BMPs selectively and antagonizes BMP actions. Noggin expression in osteoblasts is induced by BMPs and noggin opposes the effects of BMPs on osteoblastic differentiation and function in vitro. However, its effects in vivo are not known. We investigated the direct in vivo effects of noggin on bone remodeling in transgenic mice overexpressing noggin under the control of the osteocalcin promoter. Noggin transgenics suffered long bone fractures in the first month of life. Total, vertebral, and femoral bone mineral densities were reduced by 23–29%. Static and dynamic histomorphometry of the femur revealed that noggin transgenic mice had decreased trabecular bone volume, number of trabeculae, and bone formation rate. Osteoblast surface and number of osteoblasts/trabecular area were not significantly decreased, indicating impaired osteoblastic function. Osteoclast surface and number were normal/decreased, there was no increase in bone resorption, and the tissue had the appearance of woven bone. Vertebral microcomputed tomography scanning confirmed decreased trabecular bone volume and trabecular number. In conclusion, transgenic mice overexpressing noggin in the bone microenvironment have decreased trabecular bone volume and impaired osteoblastic function, leading to osteopenia and fractures.