Lymphoid Enhancer Binding Factor (Lef) 1 is a transcriptional effector of the Wnt/Lrp5/β-catenin signaling cascade, which regulates osteoblast differentiation, bone density, and skeletal strength. In this study, we describe the expression and function of an alternative Lef1 isoform in osseous cells. Lef1ΔN is a naturally occurring isoform driven by a promoter (p2) within the intron between exons 3 and 4 of Lef1. Lef1ΔN is induced during late osteoblast differentiation. This is converse to the expression pattern of the full-length Lef1 protein, which as we previously showed, decreases during differentiation. Agonists of osteoblast maturation differentially affected Lef1ΔN expression. BMP2 stimulated Lef1ΔN expression, whereas Wnt3a blocked basal and BMP2-induced expression of Lef1ΔN transcripts during osteoblast differentiation. We determined that the Lef1ΔN p2 promoter is active in osteoblasts and Runx2 regulates its activity. Stable overexpression of Lef1ΔN in differentiating osteoblasts induced the expression of osteoblast differentiation genes, osteocalcin and type 1 collagen. Taken together, our results suggest Lef1ΔN is a crucial regulator of terminal differentiation in osseous cells.