Parathyroid hormone-related protein (PTHrP) is a critical regulator of bone resorption and augments osteolysis in skeletal malignancies. Here we report that the mature PTHrP1-36 hormone is processed by matrix metalloproteinases to yield a stable product, PTHrP1-17. PTHrP1-17 retains the ability to signal through PTH1R to induce calcium flux and ERK phosphorylation but not cyclic AMP production or CREB phosphorylation. Notably, PTHrP1-17 promotes osteoblast migration and mineralization in vitro, and systemic administration of PTHrP1-17 augments ectopic bone formation in vivo. Further, in contrast to PTHrP1-36, PTHrP1-17 does not affect osteoclast formation/function in vitro or in vivo. Finally, immunoprecipitation-mass spectrometry analyses using PTHrP1-17-specific antibodies establish that PTHrP1-17 is indeed generated by cancer cells. Thus, matrix metalloproteinase-directed processing of PTHrP disables the osteolytic functions of the mature hormone to promote osteogenesis, indicating important roles for this circuit in bone remodelling in normal and disease contexts.