Bone and energy metabolism are integrated by common regulatory mechanisms. Carboxypeptidase E (CPE), also known as obesity susceptibility protein or neurotrophic factor‐α1, is recognized for its function in processing prohormones, including proinsulin and pro‐opiomelanocortin polypeptide. Independent of its enzymatic activity, CPE may also act as a secreted factor with divergent roles in neuroprotection and cancer growth; however, its role in the regulation of bone mass and skeletal cell differentiation is unknown. Male mice with global deficiency in CPE are characterized with profound visceral obesity, low bone mass in both appendicular and axial skeleton, and high volume of marrow fat. Interestingly, although metabolic deficit of CPE KO mice develops early in life, bone deficit develops in older age, suggesting that CPE bone‐specific activities differ from its enzymatic activities. Indeed, mutated CPE knockin (mCPE KI) mice ectopically expressing CPE‐E342Q, a mutated protein lacking enzymatic activity, develop the same obese phenotype and accumulate the same volume of marrow fat as CPE KO mice, but their bone mass is normal. In addition, differentiation of marrow hematopoietic cells toward tartrate‐resistant acid phosphatase‐positive multinucleated osteoclasts is highly increased in CPE KO mice, but normal in mCPE KI mice. Moreover, in murine skeletal stem cells, nonenzymatic trophic CPE has activated ERK signaling, increased cell proliferation and increased mitochondrial activity. Treatment of preosteoblastic cells with intact or mutated recombinant CPE led to a transient accumulation of small lipid droplets, increased oxidative phosphorylation, and increased cellular dependence on fatty acids as fuel for energy production. In human marrow aspirates, CPE expression increases up to 30‐fold in osteogenic conditions. These findings suggest that nonenzymatic and trophic activities of CPE regulate bone mass, whereas marrow adiposity is controlled by CPE enzymatic activity. Thus, CPE can be positioned as a factor regulating simultaneously bone and energy metabolism through a combination of shared and distinct mechanisms. © 2020 The Authors. JBMR Plus published by Wiley Periodicals, Inc. on behalf of American Society for Bone and Mineral Research © 2020 The Authors. JBMR Plus published by Wiley Periodicals LLC. on behalf of American Society for Bone and Mineral Research.