We recently reported that the pharmacological inhibition of calcineurin (Cn) by low concentrations of cyclosporin A increases osteoblast differentiation in vitro and bone mass in vivo. To determine whether Cn exerts direct actions in osteoblasts, we generated mice lacking Cnb1 (Cn regulatory subunit) in osteoblasts (ΔCnb1OB) using Cre-mediated recombination methods. Transgenic mice expressing Cre recombinase, driven by the human osteocalcin promoter, were crossed with homozygous mice that express loxP-flanked Cnb1 (Cnb1f/f). Microcomputed tomography analysis of tibiae at 3 months showed that ΔCnb1OB mice had dramatic increases in bone mass compared with controls. Histomorphometric analyses showed significant increases in mineral apposition rate (67%), bone volume (32%), trabecular thickness (29%), and osteoblast numbers (68%) as well as a 40% decrease in osteoclast numbers as compared with the values from control mice. To delete Cnb1 in vitro, primary calvarial osteoblasts, harvested from Cnb1f/f mice, were infected with adenovirus expressing the Cre recombinase. Cre-expressing osteoblasts had a complete inhibition of Cnb1 protein levels but differentiated and mineralized more rapidly than control, green fluorescent protein-expressing cells. Deletion of Cnb1 increased expression of osteoprotegerin and decreased expression of RANKL. Co-culturing Cnb1-deficient osteoblasts with wild type osteoclasts demonstrated that osteoblasts lacking Cnb1 failed to support osteoclast differentiation in vitro. Taken together, our findings demonstrate that the inhibition of Cnb1 in osteoblasts increases bone mass by directly increasing osteoblast differentiation and indirectly decreasing osteoclastogenesis. © 2007 by The American Society for Biochemistry and Molecular Biology, Inc.