Naked cuticle homolog 2 (NKD2) has been recognized as an antagonist of Wnt/β-catenin signaling and a tumor suppressor. The role of NKD2 in osteoblast and osteoclast differentiation and the mechanism are not fully understood. In this study, we identified the up-regulation of NKD2 during osteoblast and adipocyte differentiation. Functional experiments revealed that NKD2 stimulated osteoblast differentiation and suppressed adipocyte formation. Furthermore, NKD2 down-regulated the expression of receptor activator of nuclear factor-κB ligand in bone marrow mesenchymal stem cells and inhibited osteoclast formation from osteoclast precursor cells. Mechanistic investigations revealed that the regulation of osteoblast and adipocyte differentiation by NKD2 involved Wnt/β-catenin and tuberous sclerosis complex subunit 1 (TSC1)/mechanistic target of rapamycin complex 1 (mTORC1) signaling pathways. Unlike in undifferentiated mesenchymal cells where NKD2 promoted Dishevelled-1 degradation, in the cells differentiating toward osteoblasts or adipocytes NKD2 down-regulated secreted frizzled related protein 1/4 expression and failed to destabilize Dishevelled-1, thereby activating Wnt/β-catenin signaling. Moreover, NKD2 bound to TSC1 and inhibited mTORC1 signaling. Further investigation uncovered an interplay between TSC1/mTORC1 and Wnt/β-catenin signaling pathways. Finally, transplantation of NKD2-overexpressing bone marrow mesenchymal stem cells into the marrow of mice increased osteoblasts, reduced osteoclasts and marrow fat, and partially prevented bone loss in ovariectomized mice. This study provides evidence that NKD2 in mesenchymal stem/progenitor cells reciprocally regulates the differentiation of osteoblasts and adipocytes by modulating Wnt/β-catenin and mTORC1 pathways and inhibits osteoclast formation by down-regulating receptor activator of nuclear factor-κB ligand. It suggests that NKD2 up-regulation may ameliorate postmenopausal bone loss.