Mutations affecting the activity of the Wnt co-receptors LRP5 and LRP6 that cause alterations in skeletal biology confirmed the involvement of Wnt signaling in bone formation. We evaluated the potential role of Dkk1, an inhibitor of LRP5/6 activity, in bone formation by examining the normal expression pattern of Dkk1 in normal young mice and by assessing the consequences of osteoblast overexpression of Dkk1 in transgenic mice. Endogenous Dkk1 expression was detected primarily in osteoblasts and osteocytes. Transgenic over-expression of Dkk1 using two different rat collagen 1A1 promoters resulted in distinct bone phenotypes. More widespread Dkk1 expression (driven by the Col1A1 3.6 kb promoter) yielded osteopenia with forelimb deformities and hairlessness, while expression restricted to osteoblasts (driven by the Col1A1 2.3 kb promoter) induced severe osteopenia without limb defects or alopecia. The decrease in bone mass in vivo resulted from a significant 49% reduction in osteoblast numbers and was reflected in a 45% reduction in serum osteocalcin concentration; an in vitro study revealed that Dkk1 caused a dose-dependent suppression of osteoblast matrix mineralization. These data indicate that Dkk1 may directly influence bone formation and suggest that osteopenia develops in mice over-expressing Dkk1 at least in part due to diminished bone formation resulting from reduced osteoblast numbers.