Macroautophagy/autophagy is a highly regulated process involved in the turnover of cytosolic components, however its pivotal role in maintenance of bone homeostasis remains elusive. In the present study, we investigated the direct role of ATG7 (autophagy related 7) during developmental and remodeling stages in vivo using osteoblast-specific Atg7 conditional knockout (cKO) mice. Atg7 cKO mice exhibited a reduced bone mass at both developmental and adult age. The trabecular bone volume of Atg7 cKO mice was significantly lower than that of controls at 5 months of age. This phenotype was attributed to decreased osteoblast formation and matrix mineralization, accompanied with an increased osteoclast number and the extent of the bone surface covered by osteoclasts as well as an elevated secretion of TNFSF11/RANKL (tumor necrosis factor [ligand] superfamily, member 11), and a decrease in TNFRSF11B/OPG (tumor necrosis factor receptor superfamily, member 11b [osteoprotegerin]). Remarkably, Atg7 deficiency in osteoblasts triggered endoplasmic reticulum (ER) stress, whereas attenuation of ER stress by administration of phenylbutyric acid in vivo abrogated Atg7 ablation-mediated effects on osteoblast differentiation, mineralization capacity and bone formation. Consistently, Atg7 deficiency impeded osteoblast mineralization and promoted apoptosis partially in DDIT3/CHOP (DNA-damage-inducible transcript 3)- and MAPK8/JNK1 (mitogen-activated protein kinase 8)-SMAD1/5/8-dependent manner in vitro, while reconstitution of Atg7 could improve ER stress and restore skeletal balance. In conclusion, our findings provide direct evidences that autophagy plays crucial roles in regulation of bone homeostasis and suggest an innovative therapeutic strategy against skeletal diseases.