TNF receptor-associated factor 4 (TRAF4), a member of the TRAF family, plays an important role in the embryogenesis and development of the bone system. Mesenchymal stem cells (MSCs), which are the primary origin of osteoblasts in vivo, are key cells in bone development; however, whether TRAF4 modulates the osteogenic capacity of MSCs has never been explored. In this study, we demonstrated that TRAF4 positively regulates the osteogenic process of MSCs both in vitro and in vivo. In addition, we further demonstrated that TRAF4 modulates the osteogenic process of MSCs by acting as an E3 ubiquitin ligase to mediate the K48-linked ubiquitination of Smurf2 at the K119 site and cause degradation. Furthermore, TRAF4 was abnormally decreased in bone sections of ovariectomized rat and osteoporosis patients. Taken together, our findings suggest that TRAF4 positively regulates the osteogenic differentiation of MSCs by acting as an E3 ubiquitin ligase to degrade Smurf2. These results emphasize the critical role of TRAF4 in bone formation and could not only improve the clinical use of MSCs in tissue engineering but also clarify the pathogenesis of bone metabolism disorders.