Bone morphogenetic protein 3b (BMP3b), also known as growth differentiation factor 10 (GDF10), is a non-osteogenic BMP highly expressed in the skeleton. Although in vitro studies have shown that BMP3b suppresses osteoblast differentiation, the physiological role of BMP3b in regulating bone mass in vivo remains unknown. Here, we show that BMP3b deletion in mice leads to a high bone mass phenotype via an unexpected novel mechanism involving de-repression of canonical BMP/Smad signaling. BMP3b null mice were viable, and exhibited no significant difference in body size compared to wildtype control. Trabecular bone parameters assessed by histomorphometry and μCT, revealed a significant increase in bone volume and bone mineral density. Expression of osteoblast-differentiation genes were elevated in bone tissue of BMP3b null mice, whereas expression of osteoclast-related genes remained unchanged. Consistent with this, Bmp3b was highly expressed in osteoblasts relative to osteoclast cells. Ex-vivo culture of primary bone marrow mesenchymal stem cells (BMSCs) and primary bone marrow-derived osteoclasts revealed that inactivation of BMP3b enhances osteogenesis without affecting osteoclastogenesis. Mechanistically, we found that BMP3b suppressed BMP4-induced Smad1/5 phosphorylation and inhibited the activity of a BMP4-driven Id-1 luciferase reporter. Protein-protein interaction assays revealed that BMP3b competitively interfered with the association of BMP4 and BMP type I receptors. These findings suggest that BMP3b regulates bone mass by acting as a BMP receptor antagonist. Thus, maintenance of bone mass involves antagonism of canonical BMP/Smad signaling by a member of the BMP family.