Age-related osteoporosis is characterized by reduced bone formation and accumulation of fat in the bone marrow compartment. Here, we report that the type 1 cannabinoid receptor (CB1) regulates this process. Mice with CB1 deficiency (CB1(-/-)) had increased peak bone mass due to reduced bone resorption, but developed age-related osteoporosis with reduced bone formation and accumulation of adipocytes in the bone marrow space. Marrow stromal cells from CB1(-/-) mice had an enhanced capacity for adipocyte differentiation, a reduced capacity for osteoblast differentiation, and increased expression of phosphorylated CREB (pCREB) and PPARgamma. Pharmacological blockade of CB1 receptors stimulated adipocyte differentiation, inhibited osteoblast differentiation, and increased cAMP and pCREB in osteoblast and adipocyte precursors. The CB1 receptor is therefore unique in that it regulates peak bone mass through an effect on osteoclast activity, but protects against age-related bone loss by regulating adipocyte and osteoblast differentiation of bone marrow stromal cells.