Genetic evidence indicates that Wnt signaling is critically involved in bone homeostasis. In this study, we investigated the functions of canonical Wnts on differentiation of adult multipotent human mesenchymal stem cells (hMSCs) in vitro and in vivo. We observe differential sensitivities of hMSCs to Wnt inhibition of osteogenesis versus adipogenesis, which favors osteoblastic commitment under binary in vitro differentiation conditions. Wnt inhibition of osteogenesis is associated with decreased expression of osteoblastic transcription factors and inhibition of c-Jun N-terminal kinase and p38 mitogen-activated protein kinase activation, which are involved in osteogenic differentiation. An hMSC subpopulation exhibits high endogenous Wnt signaling, the inhibition of which enhances osteogenic and adipogenic differentiation in vitro. In an in vivo bone formation model, high levels of Wnt signaling inhibit de novo bone formation by hMSCs. However, hMSCs with exogenous expression of Wnt1 but not stabilized beta-catenin markedly stimulate bone formation by naive hMSCs, arguing for an important role of a canonical Wnt gradient in hMSC osteogenesis in vivo.