Integrin associated protein (IAP/CD47) has been implicated in macrophage-macrophage fusion. To understand the actions of CD47 on skeletal remodeling, we compared Cd47−/− with Cd47+/+ controls. Cd47−/− mice weighed less and had decreased areal bone mineral density compared to controls. Cd47−/− femurs were shorter in length with thinner cortices and exhibited lower trabecular bone volume due to decreased trabecular number and thickness. Histomorphometry revealed reduced bone formation and mineral apposition rates, accompanied by decreased osteoblast numbers. No differences in osteoclast number were observed despite a non-significant, but 40% decrease, in eroded surface/bone surface in Cd47−/− mice. In vitro the number of functional osteoclasts formed by differentiating Cd47−/− bone marrow cells was significantly decreased compared to wild-type cultures and was associated with a decrease in bone resorption capacity. Furthermore, by disrupting the CD47-SHPS-1 association we found that osteoclastogenesis was markedly impaired. Assays for markers of osteoclast maturation suggested the defect was at the point of fusion and not differentiation, and was associated with a lack of SHPS-1 phosphorylation, SHP-1 phosphatase recruitment and subsequent dephosphorylation of non-muscle cell myosin IIA. We also demonstrated a significant decrease in osteoblastogenesis in bone marrow stromal cells derived from Cd47−/− mice. Our finding of cell autonomous defects in Cd47−/− osteoblast and osteoclast differentiation coupled with the pronounced skeletal phenotype of Cd47−/− mice support the conclusion that CD47 plays an important role in regulating skeletal acquisition and maintenance through its actions on both bone formation and resorption.