Studying osteocyte behavior in culture has proven difficult because these embedded cells require spatially coordinated interactions with the matrix and surrounding cells to achieve the osteocyte phenotype. Using an easily attainable source of bone marrow mesenchymal stem cells, we generated cells with the osteocyte phenotype within two weeks. These "stem cell derived-osteocytes" (SCD-O) displayed stellate morphology and lacunocanalicular ultrastructure. Osteocytic genes Sost, Dmp1, E11, and Fgf23 were maximally expressed at 15 days and responded to PTH and 1,25(OH)2D3. Production of sclerostin mRNA and protein, within 15 days of culture makes the SCD-O model ideal for elucidating regulatory mechanisms. We found sclerostin to be regulated by mechanical factors, where low intensity vibration significantly reduced Sost expression. Additionally, this model recapitulates sclerostin production in response to osteoactive hormones, as PTH or LIV repressed secretion of sclerostin, significantly impacting Wnt-mediated Axin2 expression, via β-catenin signaling. In summary, SCD-O cells produce abundant matrix, rapidly attain the osteocyte phenotype, and secrete functional factors including sclerostin under non-immortalized conditions. This culture model enables ex vivo observations of osteocyte behavior while preserving an organ-like environment. Furthermore, as marrow-derived mesenchymal stem cells can be obtained from transgenic animals; our model enables study of genetic control of osteocyte behaviors.