In this study using genetic approaches in mouse we demonstrate that the secreted protein Wise plays essential roles in regulating early bone formation through its ability to modulate Wnt signaling via interactions with the Lrp5 co-receptor. In Wise-/- mutant mice we find an increase in the rate of osteoblast proliferation and a transient increase in bone mineral density. This change in proliferation is dependent upon Lrp5, as Wise;Lrp5 double mutants have normal bone mass. This suggests that Wise serves as a negative modulator of Wnt signaling in active osteoblasts. Wise and the closely related protein Sclerostin (Sost) are expressed in osteoblast cells during temporally distinct early and late phases in a manner consistent with the temporal onset of their respective increased bone density phenotypes. These data suggest that Wise and Sost may have common roles in regulating bone development through their ability to control the balance of Wnt signaling. We find that Wise is also required to potentiate proliferation in chondrocytes, serving as a potential positive modulator of Wnt activity. Our analyses demonstrate that Wise plays a key role in processes that control the number of osteoblasts and chondrocytes during bone homeostasis and provide important insight into mechanisms regulating the Wnt pathway during skeletal development.