Human periodontal ligament stem cells (PDLSCs), a type of dental tissue-derived mesenchymal stem cells (MSCs), can be clinically applied in periodontal tissue regeneration to treat periodontitis, which is initiated and sustained by bacteria. Lipopolysaccharide (LPS), the major component of the outer membrane of gram-negative bacteria, is a pertinent deleterious factor in the oral microenvironment. The aim of this study was to investigate the effect of LPS on the proliferation and osteogenic differentiation of PDLSCs, as well as the mechanisms involved. Proliferation and osteogenic differentiation of PDLSCs were detected under the stimulation of Escherichia coli-derived LPS. The data showed that E. coli-derived LPS did not affect the proliferation, viability, and cell cycle of PDLSCs. Furthermore, it promoted osteogenic differentiation with the activation of TAZ. Lentivirus-mediated depletion of TAZ (transcriptional activator with a PDZ motif) was used to determine the role of TAZ on LPS-induced enhancement of osteogenesis. PDLSCs cultured in osteogenic media with or without LPS and DKK1 (Wnt/β-catenin pathway inhibitor) were used to determine the regulatory effect of Wnt signaling. We found that TAZ depletion offset LPS-induced enhancement of osteogenesis. Moreover, treatment with DKK1 offset LPS-induced TAZ elevation and osteogenic promotion. In conclusion, E. coli-derived LPS promoted osteogenic differentiation of PDLSCs by fortifying TAZ activity. The elevation and activation of TAZ were mostly mediated by the Wnt/β-catenin pathway. PDLSC-governed alveolar bone tissue regeneration was not necessarily reduced under bacterial conditions and could be modulated by Wnt and TAZ.