In most instances, multiple myeloma (MM) plasma cells (PCs) are reliant on factors made by cells of the bone marrow (BM) stroma for their survival and growth. To date, the nature and cellular composition of the BM tumor microenvironment and the critical factors which drive tumor progression remain imprecisely defined. Our studies show that Gremlin1 (Grem1), a highly conserved protein, which is abundantly secreted by a subset of BM mesenchymal stromal cells, plays a critical role in MM disease development. Analysis of human and mouse BM stromal samples by quantitative PCR showed that GREM1/Grem1 expression was significantly higher in the MM tumor-bearing cohorts compared to healthy controls (p < 0.05, Mann–Whitney test). Additionally, BM-stromal cells cultured with 5TGM1 MM PC line expressed significantly higher levels of Grem1, compared to stromal cells alone (p < 0.01, t-test), suggesting that MM PCs promote increased Grem1 expression in stromal cells. Furthermore, the proliferation of 5TGM1 MM PCs was found to be significantly increased when co-cultured with Grem1-overexpressing stromal cells (p < 0.01, t-test). To examine the role of Grem1 in MM disease in vivo, we utilized the 5TGM1/KaLwRij mouse model of MM. Our studies showed that, compared to immunoglobulin G (IgG) control antibody-treated mice, mice treated with an anti-Grem1 neutralizing antibody had a decrease in MM tumor burden of up to 81.2% (p < 0.05, two-way ANOVA). The studies presented here demonstrate, for the first time, a novel positive feedback loop between MM PCs and BM stroma, and that inhibiting this vicious cycle with a neutralizing antibody can dramatically reduce tumor burden in a preclinical mouse model of MM.