Osteonectin, also known as SPARC (secreted protein acidic and rich in cysteine) or BM-40, is one of the most abundant noncollagenous proteins in bone. Analysis of osteonectin-null mice revealed that osteonectin is necessary for the maintenance of bone mass and normal remodeling, as osteonectin-null mice have decreased osteoblast number and bone formation rate. Cultures of bone marrow stromal cells and osteoblasts from control and osteonectin-null mice were used to determine the cellular basis for the mutant phenotype. We found that marrow stroma from osteonectin-null mice contains fewer osteoblastic precursors than that of control mice, and the osteonectin-null mutation did not affect the proliferation rate of stromal cells or osteoblasts. Whereas osteonectin-null cells could adopt an osteoblastic phenotype, a smaller proportion of these cells expressed markers of a fully differentiated osteoblast. Mutant cells exhibited decreased formation of mineralized nodules, as well as diminished expression of osteocalcin mRNA and response to PTH. Furthermore, osteonectin-null cells showed an increased tendency to form adipocytes, with enhanced expression of the adipocytic markers adipsin and CCAAT/enhancer binding protein delta. Osteonectin-null cells were also more susceptible to environmental stresses. These data indicate that osteonectin is important for osteoblast formation, maturation, and survival.