In parathyroid hormone–related protein 1‐84 [PTHrP(1‐84)] knockin mice, expression of the polycomb protein Bmi‐1 is reduced and potentially can mediate the phenotypic alterations observed. We have therefore now examined the skeletal phenotype of Bmi‐1^−/− mice in vivo and also assessed the function of bone marrow mesenchymal stem cells (BM‐MSCs) from Bmi‐1^−/− mice ex vivo in culture. Neonatal Bmi‐1^−/− mice exhibited skeletal growth retardation, with reduced chondrocyte proliferation and increased apoptosis. Osteoblast numbers; gene expression of alkaline phosphatase, type I collagen, and osteocalcin; the mineral apposition rate; trabecular bone volume; and bone mineral density all were reduced significantly; however, the number of bone marrow adipocytes and Ppar‐γ expression were increased. These changes were consistent with the skeletal phenotype observed in the PTHrP(1‐84) knockin mouse. The efficiency of colony‐forming unit fibroblast (CFU‐F) formation in bone marrow cultures was decreased, and the percentage of alkaline phosphatase–positive CFU‐F and Runx2 expression were reduced. In contrast, adipocyte formation and Ppar‐γ expression in cultures were increased, and expression of the polycomb protein sirtuin (Sirt1) was reduced. Reduced proliferation and increased apoptosis of BM‐MSCs were associated with upregulation of senescence‐associated tumor‐suppressor genes, including p16, p19, and p27. Analysis of the skeletal phenotype in Bmi‐1^−/− mice suggests that Bmi‐1 functions downstream of PTHrP. Furthermore, our studies indicate that Bmi‐1 maintains self‐renewal of BM‐MSCs by inhibiting the expression of p27, p16, and p19 and alters the cell fate of BM‐MSCs by enhancing osteoblast differentiation and inhibiting adipocyte differentiation at least in part by stimulating Sirt1 expression. Bmi‐1 therefore plays a critical role in promoting osteogenesis. © 2010 American Society for Bone and Mineral Research