Global energy balance in mammals is controlled by the actions of circulating hormones that coordinate fuel production and utilization in metabolically active tissues. Bone-derived osteocalcin, in its undercarboxylated, hormonal form, regulates fat deposition and is a potent insulin secretagogue. Here, we show that insulin receptor (IR) signaling in osteoblasts controls osteoblast development and osteocalcin expression by suppressing the Runx2 inhibitor Twist2. Mice lacking IR in osteoblasts have low circulating undercarboxylated osteocalcin and reduced bone acquisition due to decreased bone formation and deficient numbers of osteoblasts. With age, these mice develop marked peripheral adiposity and hyperglycemia accompanied by severe glucose intolerance and insulin resistance. The metabolic abnormalities in these mice are improved by infusion of undercarboxylated osteocalcin. These results indicate the existence of a bone-pancreas endocrine loop through which insulin signaling in the osteoblast ensures osteoblast differentiation and stimulates osteocalcin production, which in turn regulates insulin sensitivity and pancreatic insulin secretion. © 2010 Elsevier Inc.