Estrogen protects bone loss by promoting Fas ligand (FasL) transcription in osteoclasts and osteoblasts to induce apoptosis of osteoclasts. Bone marrow-derived mesenchymal stem cells (BMMSCs) express FasL protein, which is necessary for BMMSCs to induce T-cell apoptosis in cell therapy. However, the physiologic function of FasL in BMMSCs is unknown. In this study, using an in vitro coculture system and an in vivo BMMSC transplantation assay, we found that BMMSCs potently induced apoptosis of osteoclasts through the FasL/Fas pathway. Estrogen was necessary for this process as a promoter of FasL protein accumulation in BMMSCs. Furthermore, estrogen elevated FasL protein accumulation, not by increasing FasL gene transcription, but through microRNA-mediated posttranscriptional regulation. In brief, estrogen down-regulated expression of miR-181a, a negative modulator of FasL targeting the 3'-UTR of FasL mRNA. Estrogen deficiency resulted in excessive miR-181a, which decreased FasL protein levels to suppress BMMSC-induced osteoclast apoptosis. Furthermore, knockdown of miR-181a recovered the BMMSC defect to induce osteoclast apoptosis during estrogen deficiency. Taken together, our results showed that estrogen preserves FasL protein accumulation by inhibiting miR-181a expression in BMMSCs to maintain bone remodeling balance, suggesting a novel mechanism by which estrogen preserves bone mass.