YAP (yes-associated protein) is a transcriptional factor that is negatively regulated by Hippo pathway, a conserved pathway for the development and size control of multiple organs. The exact function of YAP in bone homeostasis remains controversial. Here we provide evidence for YAP’s function in promoting osteogenesis, suppressing adipogenesis, and thus maintaining bone homeostasis. YAP is selectively expressed in osteoblast (OB)-lineage cells. Conditionally knocking out Yapin the OB lineage in mice reduces cell proliferation and OB differentiation and increases adipocyte formation, resulting in a trabecular bone loss. Mechanistically, YAP interacts with β-catenin and is necessary for maintenance of nuclear β-catenin level and Wnt/β-catenin signaling. Expression of β-catenin in YAP-deficient BMSCs (bone marrow stromal cells) diminishes the osteogenesis deficit. These results thus identify YAP-β-catenin as an important pathway for osteogenesis during adult bone remodeling and uncover a mechanism underlying YAP regulation of bone homeostasis. A key regulatory gene both promotes bone formation and suppresses production of fat-storing bone marrow cells, thus supporting the key process of bone remodeling. As adults, our bones are in a constant state of flux, constantly being dissolved and rebuilt to maintain a steady state known as homeostasis. An international team led by Wen-Cheng Xiong, of Case Western Reserve University, Cleveland, Ohio, studied the role of the gene ‘yes-associated protein’ (YAP), a transcription factor (gene controlling the activity of other genes). Using mice, they found that YAP is essential for osteogenesis, and prevents adipocyte (fat-storing cell) formation. Without a functional YAP gene, mice experienced a loss of a softer type of bone known as trabecular bone. The molecular pathways controlled by YAP may thus be important for bone remodeling in vertebrates.