Bone formation requires osteogenic differentiation of multipotent mesenchymal stromal cells (MSCs) and lineage progression of committed osteoblast precursors. Osteogenic phenotype commitment is epigenetically controlled by genomic (chromatin) and non-genomic (non-coding RNA) mechanisms. Control of osteogenesis by long non-coding RNAs remains a largely unexplored molecular frontier. Here, we performed comprehensive transcriptome analysis at early stages of osteogenic cell fate determination in human MSCs, focusing on expression of lncRNAs. We identified a chromatin-bound lncRNA (MIR181A1HG) that is highly expressed in self-renewing MSCs. MIR181A1HG is down-regulated when MSCs become osteogenic lineage committed and is retained during adipogenic differentiation, suggesting lineage-related molecular functions. Consistent with a key role in human MSC proliferation and survival, we demonstrate that knockdown of MIR181A1HG in the absence of osteogenic stimuli impedes cell cycle progression. Loss of MIR181A1HG enhances differentiation into osteo-chondroprogenitors that produce multiple extracellular matrix proteins. RNA-seq analysis shows that loss of chromatin-bound MIR181A1HG alters expression and BMP2 responsiveness of skeletal gene networks (e.g., SOX5 and DLX5). We propose that MIR181A1HG is a novel epigenetic regulator of early stages of mesenchymal lineage commitment towards osteo-chondroprogenitors. This discovery permits consideration of MIR181A1HG and its associated regulatory pathways as targets for promoting new bone formation in skeletal disorders.