We describe here distinct functions of leukemia inhibitory factor (LIF) in bone development/growth and adult skeletal homeostasis. In the growth plate and developing neonate bones, LIF deficiency enhanced vascular endothelial growth factor (VEGF) levels, enlarged blood vessel formation, and increased the formation of “giant” osteoclasts/chondroclasts that rapidly destroyed the mineralized regions of the growth plate and developing neonatal bone. Below this region, osteoblasts formed large quantities of woven bone. In contrast, in adult bone undergoing remodeling osteoclast formation was unaffected by LIF deficiency, whereas osteoblast formation and function were both significantly impaired, resulting in osteopenia. Consistent with LIF promoting osteoblast commitment, enhanced marrow adipocyte formation was also observed in adult LIF null mice, and adipocytic differentiation of murine stromal cells was delayed by LIF treatment. LIF, therefore, controls vascular size and osteoclast differentiation during the transition of cartilage to bone, whereas an anatomically separate LIF‐dependent pathway regulates osteoblast and adipocyte commitment in bone remodeling. © 2012 American Society for Bone and Mineral Research