The differentiation factor NEL-like molecule-1 (NELL-1) has been reported as osteoinductive in multiple in vivo preclinical models. Bone morphogenetic protein (BMP)-2 is used clinically for skeletal repair, but in vivo administration can induce abnormal, adipose-filled, poorquality bone. We demonstrate that NELL-1 combined with BMP2 significantly optimizes osteogenesis in a rodent femoral segmental defect model by minimizing the formation of BMP2-induced adipose-filled cystlike bone. In vitro studies using the mouse bone marrow stromal cell line M2-10B4 and human primary bone marrow stromal cells have confirmed that NELL-1 enhances BMP2-induced osteogenesis and inhibits BMP2-induced adipogenesis. Importantly, the ability of NELL-1 to direct BMP2-treated cells toward osteogenesis and away from adipogenesis requires intact canonical Wnt signaling. Overall, these studies establish the feasibility of combining NELL-1 with BMP2 to improve clinical bone regeneration and provide mechanistic insight into canonical Wnt pathway activity during NELL-1 and BMP2 osteogenesis. The novel abilities of NELL-1 to stimulate Wnt signaling and to repress adipogenesis may highlight new treatment approaches for bone loss in osteoporosis. NEL-like molecule-1 (NELL-1) is an osteoinductive growth factor first identified through its overexpression in pathologically fusing suture specimens from patients with craniosynostosis. 1,2 Transgenic Nell1-overexpressing mice recapitulate craniosynostosis-like phenotypes, exhibiting gross calvarial bone overgrowth and increased osteoblast differentiation. 3 Conversely, Nell1 deficiency severely disrupts bone growth, as mice with nonsense mutations in Nell1 die perinatally with major skeletal anomalies in the craniofacial complex, spine, and long bones. 4e6 Highlighting the central role of NELL-1 in skeletal development, NELL-1 mediates key downstream effects of the master osteogenic regulator runt-related transcription factor 2 (RUNX2) 7 and can partially rescue RUNX2 loss of function. 8 NELL-1 can also transiently activate mitogen-activated protein kinase signaling to induce RUNX2 phosphorylation and osteogenic differentiation. 9 Recently, we