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Abstract In a previous transcriptomic study of human bone marrow stromal cells (BMSCs, also known as bone marrow-derived “mesenchymal stem cells”), SFRP2 was highly over-represented in a subset of multipotent BMSCs (skeletal stem cells, SSCs), which recreate a bone/marrow organ in an in vivo ectopic bone formation assay. SFRPs modulate WNT signaling, which is essential to maintain skeletal homeostasis, but the specific role of SFRP2 in BMSCs/SSCs is unclear. Here, we evaluated Sfrp2 deficiency on BMSC/SSC function in models of skeletal organogenesis and regeneration. The skeleton of Sfrp2-deficient (KO) mice is overtly normal; but their BMSCs/SSCs exhibit reduced colony-forming efficiency, reflecting low SSC self-renewal/abundancy. Sfrp2 KO BMSCs/SSCs formed less trabecular bone than those from WT littermates in the ectopic bone formation assay. Moreover, regeneration of a cortical drilled hole defect was dramatically impaired in Sfrp2 KO mice. Sfrp2-deficient BMSCs/SSCs exhibited poor in vitro osteogenic differentiation as measured by Runx2 and Osterix expression and calcium accumulation. Interestingly, activation of the Wnt co-receptor, Lrp6, and expression of Wnt target genes, Axin2, C-myc and Cyclin D1, were reduced in Sfrp2-deficient BMSCs/SSCs. Addition of recombinant Sfrp2 restored most of these activities, suggesting that Sfrp2 acts as a Wnt agonist. We demonstrate that Sfrp2 plays a role in self-renewal of SSCs and in the recruitment and differentiation of adult SSCs during bone healing. SFRP2 is also a useful marker of BMSC/SSC multipotency, and a factor to potentially improve the quality of ex vivo expanded BMSC/SSC products.