Sirt1, the mammalian ortholog of the yeast Sir2 (silent information regulator 2), was shown to play an important role in metabolism and in age-associated diseases, but its role in skeletal homeostasis and osteoporosis has yet not been studied. Using 129/Sv mice with a germline mutation in the Sirt1 gene, we demonstrate that Sirt1 haplo-insufficient (Sirt1^+/−) female mice exhibit a significant reduction in bone mass characterized by decreased bone formation and increased marrow adipogenesis. Importantly, we identify Sost, encoding for sclerostin, a critical inhibitor of bone formation, as a novel target of Sirt1. Using chromatin immunoprecipitation analysis, we reveal that Sirt1 directly and negatively regulates Sost gene expression by deacetylating histone 3 at lysine 9 at the Sost promoter. Sost down-regulation by small interfering RNA and the administration of a sclerostin-neutralizing antibody restore gene expression of osteocalcin and bone sialoprotein as well as mineralized nodule formation in Sirt1^+/− marrow-derived mesenchymal stem cells induced to osteogenesis. These findings reveal a novel role for Sirt1 in bone as a regulator of bone mass and a repressor of sclerostin, and have potential implications suggesting that Sirt1 is a target for promoting bone formation as an anabolic approach for treatment of osteoporosis.