Bone remodeling depends on the precise coordination of bone resorption and subsequent bone formation. Disturbances of this process are associated with skeletal diseases, such as Camurati-Engelmann disease (CED). We show using in vitro and animal models that active TGF-β1 released during bone resorption coordinates bone formation by inducing migration of bone marrow stromal cells, also known as bone mesenchymal stem cells (BMSCs) to the bone resorptive sites and that this process is mediated through SMAD signaling pathway. Analysis of a mouse model carrying a CED-derived TGF-β1 mutation, which exhibits the typical progressive diaphyseal dysplasia with tibial fractures, we found high levels of active TGF-β1 in the bone marrow. Treatment with a TGF-β type I receptor inhibitor partially rescued the uncoupled bone remodeling and prevented the fractures. Thus, as TGF-β1 functions to couple bone resorption and formation, modulation of TGF-β1 activity could be an effective treatment for the bone remodeling diseases.