Humans lacking sclerostin display progressive bone overgrowth due to increased bone formation. Although it is well established that sclerostin is an osteocyte-secreted bone formation inhibitor, the underlying molecular mechanisms are not fully elucidated. We identified in tandem affinity purification proteomics screens LRP4 (low density lipoprotein-related protein 4) as a sclerostin interaction partner. Biochemical assays with recombinant proteins confirmed that sclerostin LRP4 interaction is direct. Interestingly, in vitro overexpression and RNAi-mediated knockdown experiments revealed that LRP4 specifically facilitates the previously described inhibitory action of sclerostin on Wnt1/β-catenin signaling. We found the extracellular β-propeller structured domain of LRP4 to be required for this sclerostin facilitator activity. Immunohistochemistry demonstrated that LRP4 protein is present in human and rodent osteoblasts and osteocytes, both presumed target cells of sclerostin action. Silencing of LRP4 by lentivirus-mediated shRNA delivery blocked sclerostin inhibitory action on in vitro bone mineralization. Notably, we identified two mutations in LRP4 (R1170W and W1186S) in patients suffering from bone overgrowth. We found that these mutations impair LRP4 interaction with sclerostin and its concomitant sclerostin facilitator effect. Together these data indicate that the interaction of sclerostin with LRP4 is required to mediate the inhibitory function of sclerostin on bone formation, thus identifying a novel role for LRP4 in bone.