Notch signaling is critical for osteoblastic differentiation; however, the specific contribution of individual Notch ligands is unknown. Parathyroid hormone (PTH) regulates the Notch ligand Jagged1 in osteoblastic cells. To determine if osteolineage Jagged1 contributes to bone homeostasis, selective deletion of Jagged1 in osteolineage cells was achieved through the presence of Prx1 promoter‐driven Cre recombinase expression, targeting mesenchymal stem cells (MSCs) and their progeny (PJag1 mice). PJag1 mice were viable and fertile and did not exhibit any skeletal abnormalities at 2 weeks of age. At 2 months of age, however, PJag1 mice had increased trabecular bone mass compared to wild‐type (WT) littermates. Dynamic histomorphometric analysis showed increased osteoblastic activity and increased mineral apposition rate. Immunohistochemical analysis showed increased numbers of osteocalcin‐positive mature osteoblasts in PJag1 mice. Also increased phenotypically defined Lin^–/CD45^–/CD31^–/Sca1^–/CD51⁺ osteoblastic cells were measured by flow cytometric analysis. Surprisingly, phenotypically defined Lin^–/CD45^–/CD31^–/Sca1⁺/CD51⁺ MSCs were unchanged in PJag1 mice as measured by flow cytometric analysis. However, functional osteoprogenitor (OP) cell frequency, measured by Von Kossa⁺ colony formation, was decreased, suggesting that osteolineage Jagged1 contributes to maintenance of the OP pool. The trabecular bone increases were not due to osteoclastic defects, because PJag1 mice had increased bone resorption. Because PTH increases osteoblastic Jagged1, we sought to understand if osteolineage Jagged1 modulates PTH‐mediated bone anabolism. Intermittent PTH treatment resulted in a significantly greater increase in BV/TV in PJag1 hind limbs compared to WT. These findings demonstrate a critical role of osteolineage Jagged1 in bone homeostasis, where Jagged1 maintains the transition of OP to maturing osteoblasts. This novel role of Jagged1 not only identifies a regulatory loop maintaining appropriate populations of osteolineage cells, but also provides a novel approach to increase trabecular bone mass, particularly in combination with PTH, through modulation of Jagged1. © 2017 American Society for Bone and Mineral Research.