Previous reports indicate that ephrinB2 expression by osteoblasts is stimulated by parathyroid hormone (PTH) and its related protein (PTHrP) and that ephrinB2/EphB4 signaling between osteoblasts and osteoclasts stimulates osteoblast differentiation while inhibiting osteoclast differentiation. To determine the role of the ephrinB2/EphB4 interaction in the skeleton, we used a specific inhibitor, soluble EphB4 (sEphB4), in vitro and in vivo. sEphB4 treatment of cultured osteoblasts specifically inhibited EphB4 and ephrinB2 phosphorylation and reduced mRNA levels of late markers of osteoblast/osteocyte differentiation (osteocalcin, dentin matrix protein-1 [DMP-1], sclerostin, matrix-extracellular phosphoglycoprotein [MEPE]), while substantially increasing RANKL. sEphB4 treatment in vivo in the presence and absence of PTH increased osteoblast formation and mRNA levels of early osteoblast markers (Runx2, alkaline phosphatase, Collagen 1α1, and PTH receptor [PTHR1]), but despite a substantial increase in osteoblast numbers, there was no significant change in bone formation rate or in late markers of osteoblast/osteocyte differentiation. Rather, in the presence of PTH, sEphB4 treatment significantly increased osteoclast formation, an effect that prevented the anabolic effect of PTH, causing instead a decrease in trabecular number. This enhancement of osteoclastogenesis by sEphB4 was reproduced in vitro but only in the presence of osteoblasts. These data indicate that ephrinB2/EphB4 signaling within the osteoblast lineage is required for late stages of osteoblast differentiation and, further, restricts the ability of osteoblasts to support osteoclast formation, at least in part by limiting RANKL production. This indicates a key role for the ephrinB2/EphB4 interaction within the osteoblast lineage in osteoblast differentiation and support of osteoclastogenesis.