Bone loss in postmenopausal osteoporosis is induced chiefly by an imbalance of bone-forming osteoblasts and bone-resorbing osteoclasts. Salubrinal is a synthetic compound that inhibits de-phosphorylation of eukaryotic translation initiation factor 2 alpha (eIF2α). Phosphorylation of eIF2α alleviates endoplasmic reticulum (ER) stress, which may activate autophagy. We hypothesized that eIF2α signaling regulates bone homeostasis by promoting autophagy in osteoblasts and inhibiting osteoclast development. To test the hypothesis, we employed salubrinal to elevate the phosphorylation of eIF2α in an ovariectomized (OVX) mouse model and cell cultures. In the OVX model, salubrinal prevented abnormal expansion of rough ER and decreased the number of acidic vesiculars. It regulated ER stress-associated signaling molecules such as Bip, p-eIF2α, ATF4 and CHOP, and promoted autophagy of osteoblasts via regulation of eIF2α, Atg7, LC3, and p62. Salubrinal markedly alleviated OVX-induced symptoms such as reduction of bone mineral density and bone volume fraction. In primary bone-marrow-derived cells, salubrinal increased the differentiation of osteoblasts, and decreased the formation of osteoclasts by inhibiting nuclear factor of activated T-cells cytoplasmic 1 (NFATc1). Live cell imaging and RNA interference demonstrated that suppression of osteoclastogenesis is in part mediated by Rac1 GTPase. Collectively, this study demonstrates that ER stress-autophagy axis plays an important role in OVX mice. Bone-forming osteoblasts are restored by maintaining phosphorylation of eIF2α, and bone-resorbing osteoclasts are regulated by inhibiting NFATc1 and Rac1 GTPase.