Transforming growth factor beta (TGFbeta) is a multifunctional cytokine involved in skeletal development. Smad4 is the central intracellular mediator of TGFbeta signaling. Our previous studies reveal that Smad4 is required for maintaining the normal development of chondrocytes in the growth plate. However, its biological function during postnatal bone remodeling is largely unknown. To investigate the role of Smad4 in maintaining bone homeostasis, we disrupted the Smad4 gene in differentiated osteoblasts using the Cre-loxP system. The Smad4 mutant mice exhibited lower bone mass up to 6 months of age. The proliferation and function of the mutant osteoblasts were significantly decreased. Bone mineral density, bone volume, bone formation rate and osteoblast numbers were remarkably reduced in Smad4 mutants. Intriguingly, the trabecular bone volume in Smad4 mutant mice older than 7 months was higher than that of controls whereas the calvarial and cortical bone remained thinner than in controls. This correlated with reduced bone resorption possibly caused by downregulation of TGFbeta1 and alteration of the ligand receptor activator of NF-kappaB (RANKL)-osteoprotegerin (OPG) axis. These studies demonstrate essential roles of Smad4-mediated TGFbeta signaling in coupling bone formation and bone resorption and maintaining normal postnatal bone homeostasis.