Long-term use of thiazolidinediones (TZDs) is associated with bone loss and an increased risk of fracture in patients with type 2 diabetes (T2DM). Incretin-based drugs (glucagon-like peptide-1 (GLP-1) agonists and dipeptidylpeptidase-4 (DPP-4) inhibitors) have several benefits in many systems in addition to glycemic control. In a previous study, we reported that exendin-4 might increase bone mineral density (BMD) by decreasing the expression of SOST/sclerostin in osteocytes in a T2DM animal model. In this study, we investigated the effects of a DPP-4 inhibitor on TZD-induced bone loss in a T2DM animal model. We randomly divided 12-week-old male Zucker Diabetic Fatty (ZDF) rats into four groups; control, vildagliptin, pioglitazone, and vildagliptin and pioglitazone combination. Animals in each group received the respective treatments for 5 weeks. We performed an intraperitoneal glucose tolerance test (IPGTT) before and after treatment. BMD and the trabecular micro-architecture were measured by DEXA and micro CT, respectively, at the end of the treatment. The circulating levels of active GLP-1, bone turnover markers, and sclerostin were assayed. Vildagliptin treatment significantly increased BMD and trabecular bone volume. The combination therapy restored BMD, trabecular bone volume, and trabecular bone thickness that were decreased by pioglitazone. The levels of the bone formation marker, osteocalcin, decreased and that of the bone resorption marker, tartrate-resistant acid phosphatase (TRAP) 5b increased in the pioglitazone group. These biomarkers were ameliorated and the pioglitazone-induced increase in sclerostin level was lowered to control values by the addition of vildagliptin. In conclusion, our results indicate that orally administered vildagliptin demonstrated a protective effect on pioglitazone-induced bone loss in a type 2 diabetic rat model.