Notch signaling between neighboring cells controls many cell fate decisions in metazoans both during embryogenesis and in postnatal life. Previously, we uncovered a critical role for physiological Notch signaling in suppressing osteoblast differentiation in vivo. However, the contribution of individual Notch receptors and the downstream signaling mechanism have not been elucidated. Here we report that removal of Notch2, but not Notch1, from the embryonic limb mesenchyme markedly increased trabecular bone mass in adolescent mice. Deletion of the transcription factor RBPjk, a mediator of all canonical Notch signaling, in the mesenchymal progenitors but not the more mature osteoblast-lineage cells, caused a dramatic high-bone-mass phenotype characterized by increased osteoblast numbers, diminished bone marrow mesenchymal progenitor pool, and rapid age-dependent bone loss. Moreover, mice deficient in Hey1 and HeyL, two target genes of Notch-RBPjk signaling, exhibited high bone mass. Interestingly, Hey1 bound to and suppressed the NFATc1 promoter, and RBPjk deletion increased NFATc1 expression in bone. Finally, pharmacological inhibition of NFAT alleviated the high-bone-mass phenotype caused by RBPjk deletion. Thus, Notch-RBPjk signaling functions in part through Hey1-mediated inhibition of NFATc1 to suppress osteoblastogenesis, contributing to bone homeostasis in vivo.