Loss of skeletal integrity during ageing and disease is associated with an imbalance in the opposing actions of osteoblasts and osteoclasts. Here we show that intrinsic ageing of skeletal stem cells (SSCs) in mice alters signalling in the bone marrow niche and skews the differentiation of bone and blood lineages, leading to fragile bones that regenerate poorly. Functionally, aged SSCs have a decreased bone- and cartilage-forming potential but produce more stromal lineages that express high levels of pro-inflammatory and pro-resorptive cytokines. Single-cell RNA-sequencing studies link the functional loss to a diminished transcriptomic diversity of SSCs in aged mice, which thereby contributes to the transformation of the bone marrow niche. Exposure to a youthful circulation through heterochronic parabiosis or systemic reconstitution with young haematopoietic stem cells did not reverse the diminished osteochondrogenic activity of aged SSCs, or improve bone mass or skeletal healing parameters in aged mice. Conversely, the aged SSC lineage promoted osteoclastic activity and myeloid skewing by haematopoietic stem and progenitor cells, suggesting that the ageing of SSCs is a driver of haematopoietic ageing. Deficient bone regeneration in aged mice could only be returned to youthful levels by applying a combinatorial treatment of BMP2 and a CSF1 antagonist locally to fractures, which reactivated aged SSCs and simultaneously ablated the inflammatory, pro-osteoclastic milieu. Our findings provide mechanistic insights into the complex, multifactorial mechanisms that underlie skeletal ageing and offer prospects for rejuvenating the aged skeletal system.