Carboxyl terminus of Hsp70-interacting protein (CHIP or STUB1) is an E3 ligase and regulates the stability of several proteins which are involved in different cellular functions. Our previous studies demonstrated that Chip deficient mice display bone loss phenotype due to increased osteoclast formation through enhancing TRAF6 activity in osteoclasts. In this study we provide novel evidence about the function of CHIP. We found that osteoblast differentiation and bone formation were also decreased in Chip KO mice. In bone marrow stromal (BMS) cells derived from Chip-/- mice, expression of a panel of osteoblast marker genes was significantly decreased. ALP activity and mineralized bone matrix formation were also reduced in Chip-deficient BMS cells. We also found that in addition to the regulation of TRAF6, CHIP also inhibits TNFα-induced NF-κB signaling through promoting TRAF2 and TRAF5 degradation. Specific deletion of Chip in BMS cells downregulated expression of osteoblast marker genes which could be reversed by the addition of NF-κB inhibitor. These results demonstrate that the osteopenic phenotype observed in Chip-/- mice was due to the combination of increased osteoclast formation and decreased osteoblast differentiation. Taken together, our findings indicate a significant role of CHIP in bone remodeling.