Periodontal ligament stem cells (PDLSCs), a new population of mesenchymal stem cells (MSCs), have been isolated from the periodontal ligament (PDL). The capacity of multipotency and self‐renewal makes them an excellent cell source for bone regeneration and repair. However, their bone‐regeneration ability could be awakened in inflammatory microenvironments, which may be the result of changes in their differentiation potential. Recently, genetic evidences has shown that the Wnt pathway plays an important role in bone homeostasis. In this study we have determined the specific role of β‐catenin in osteogenic differentiation of PDLSCs obtained from inflammatory microenvironments (P‐PDLSCs). The inflammatory microenvironment, while inhibiting osteogenic differentiation potential, promotes proliferation of MSCs. A higher the level of β‐catenin in P‐PDLSCs than in H‐PDLSCs (PDLSCs obtained from a healthy microenvironment) resulted in the same disparity in canonical Wnt signaling pathway activation between each cell type. Here we show that activation of β‐catenin suppresses the noncanonical Wnt/Ca2+ pathway, leading to increased proliferation but reduced osteogenic differentiation of P‐PDLSCs. Downregulation of the levels of β‐catenin by treatment with dickkopf‐1 (DKK‐1) leads to activation of the noncanonical Wnt/Ca2+ pathway, which, in turn, results in the promotion of osteogenic differentiation in P‐PDLSCs. Interestingly, β‐catenin can affect both the canonical Wnt/β‐catenin pathway and the noncanonical Wnt/Ca2+ pathway. Our data indicate that β‐catenin plays a central role in regulating osteogenic differentiation of MSCs in inflammatory microenvironments. Given the important role of Wnt signaling in osteogenic differentiation, it is possible that agents that can modify this pathway may be of value in bone regeneration by MSCs in chronic inflammatory microenvironments. © 2011 American Society for Bone and Mineral Research