YAP (yes-associated protein) is a transcriptional factor that is negatively regulated by Hippo pathway, a conserved pathway for the development and size control of multiple organs. The exact function of YAP in bone homeostasis remains controversial. Here we provide evidence for YAP’s function in promoting osteogenesis, suppressing adipogenesis, and thus maintaining bone homeostasis. YAP is selectively expressed in osteoblast (OB)-lineage cells. Conditionally knocking out Yap in the OB lineage in mice reduces cell proliferation and OB differentiation and increases adipocyte formation, resulting in a trabecular bone loss. Mechanistically, YAP interacts with β-catenin and is necessary for maintenance of nuclear β-catenin level and Wnt/β-catenin signaling. Expression of β-catenin in YAP-deficient BMSCs (bone marrow stromal cells) diminishes the osteogenesis deficit. These results thus identify YAP-β-catenin as an important pathway for osteogenesis during adult bone remodeling and uncover a mechanism underlying YAP regulation of bone homeostasis.