Mutations in the NF1 tumor suppressor gene cause neurofibromatosis type 1, a pandemic autosomal dominant genetic disorder with an incidence of 1:3000. Individuals with NF1 have a variety of malignant and non-malignant manifestations, including skeletal manifestations, such as osteoporosis, scoliosis and short statures. However, the mechanism(s) underlying the osseous manifestations in NF1 are poorly understood. In the present study, utilizing Nf1 haploinsufficient (+/-) mice, we demonstrate that Nf1+/- mesenchymal stem/progenitor cells (MSPC) have increased proliferation and colony forming unit-fibroblast (CFU-F) capacity compared with wild-type (WT) MSPC. Nf1+/- MSPC also have fewer senescent cells and have a significantly higher telomerase activity compared with WT MSPC. Nf1+/- MSPC have impaired osteoblast differentiation as determined by alkaline phosphatase staining, and confirmed by single CFU-F replating assays. The impaired osteoblast differentiation in Nf1+/- MSPC is consistent with the reduced expression of osteoblast markers at the mRNA level, including osteocalcin and osteonectin. Importantly, re-expression of the full-length NF1 GTPase activating related domain (NF1 GAP-related domain) is sufficient to restore the impaired osteoblast differentiation in Nf1+/- MSPC. Taken together, our results suggest that neurofibromin plays a crucial role in modulating MSPC differentiation into osteoblasts, and the defect in osteoblast differentiation may contribute at least in part to the osseous abnormalities seen in individuals with NF1.