The protein tyrosine phosphatase SHP2, encoded by PTPN11, is ubiquitously expressed and essential for the development and/or maintenance of multiple tissues and organs. SHP2 is involved in gastrointestinal (GI) epithelium development and homeostasis, but the underlying mechanisms remain elusive. While studying SHP2's role in skeletal development, we made osteoblast-specific SHP2 deficient mice using Osterix (Osx)-Cre as a driver to excise Ptpn11 floxed alleles. Phenotypic characterization of these SHP2 mutants unexpectedly revealed a critical role of SHP2 in GI biology. Mice lacking SHP2 in Osx+ cells developed a fatal GI pathology with dramatic villus hypoplasia. OSTERIX, an OB-specific zinc finger-containing transcription factor is for the first time found to be expressed in GI crypt cells, and SHP2 expression in the crypt Osx+ cells is critical for self-renewal and proliferation. Further, immunostaining revealed the colocalization of OSTERIX with OLFM4 and LGR5, two bona fide GI stem cell markers, at the crypt cells. Furthermore, OSTERIX expression is found to be associated with GI malignancies. Knockdown of SHP2 expression had no apparent influence on the relative numbers of enterocytes, goblet cells or Paneth cells. Given SHP2's key regulatory role in OB differentiation, our studies suggest that OSTERIX and SHP2 are indispensable for gut homeostasis, analogous to SOX9's dual role as a master regulator of cartilage and an important regulator of crypt stem cell biology. Our findings also provide a foundation for new avenues of inquiry into GI stem cell biology and of OSTERIX's therapeutic and diagnostic potential.