ABSTRACT The osteoclast‐derived collagen triple helix repeat containing 1 (CTHRC1) protein stimulates osteoblast differentiation, but the underlying mechanism remains unclear. Here, we identified Wnt‐activated inhibitory factor 1 (WAIF1)/5T4 as a cell‐surface protein binding CTHRC1. The WAIF1‐encoding Trophoblast glycoprotein (Tpbg) gene, which is abundantly expressed in the brain and bone but not in other tissues, showed the same expression pattern as Cthrc1. Tpbg downregulation in marrow stromal cells reduced CTHRC1 binding and CTHRC1‐stimulated alkaline phosphatase activity through PKCδ activation of MEK/ERK, suggesting a novel WAIF1/PKCδ/ERK pathway triggered by CTHRC1. Unexpectedly, osteoblast lineage‐specific deletion of Tpbg downregulated Rankl expression in mouse bones and reduced both bone formation and resorption; importantly, it impaired bone mass recovery following RANKL‐induced resorption, reproducing the phenotype of osteoclast‐specific Cthrc1 deficiency. Thus, the binding of osteoclast‐derived CTHRC1 to WAIF1 in stromal cells activates PKCδ‐ERK osteoblastogenic signaling and serves as a key molecular link between bone resorption and formation during bone remodeling. © 2018 American Society for Bone and Mineral Research.