Xylosyltransferase-I (XT-I) plays a crucial role in skeletal development and cartilage integrity. An XT-I deficiency is linked to severe bone disorders, such as Desbuquois dysplasia type 2. While animal models have provided insights into XT-I's role during skeletal development, its specific effects on adult bone homeostasis, particularly in human mesenchymal stem cell (hMSC) differentiation, remain unclear. This study investigates how XT-I deficiency impacts the differentiation of hMSCs into chondrocytes, osteoblasts, and adipocytes-key processes in bone formation and repair. The aim of this study was to elucidate for the first time the molecular mechanisms by which XT-I deficiency leads to impaired bone homeostasis. Using CRISPR-Cas9-mediated gene editing, we generated knockdown (KD) hMSCs to assess their differentiation potential. Our findings revealed significant disruption in the chondrogenic differentiation in KD hMSCs, characterized by the altered expression of regulatory factors and extracellular matrix components, suggesting premature chondrocyte hypertrophy. Despite the presence of perilipin-coated lipid droplets in the adipogenic pathway, the overall leptin mRNA and protein expression was reduced in KD hMSCs, indicating a compromised lipid metabolism. Conversely, osteogenic differentiation was largely unaffected, with KD and wild-type hMSCs exhibiting comparable mineralization processes, indicating that critical aspects of osteogenesis were preserved despite the deficiency. In summary, these results underscore XT-I's pivotal role in regulating differentiation pathways within the bone marrow niche, influencing cellular functions critical for skeletal health. A deeper insight into bone biology may pave the way for the development of innovative therapeutic approaches to improve bone health and treat skeletal disorders.