Selective knockdown of phosphatase and tensin homolog (PTEN) has been recently shown to increase life long accumulation of bone and its ability to increase osteoblast lifespan. In order to determine how loss of PTEN function affects osteoblast differentiation, we created cell lines with stable knockdown of PTEN expression using short hairpin RNA vectors and characterized several clones. The effect of deregulated PTEN in osteoblasts was studied in relationship to cell proliferation and differentiation. Downregulation of PTEN initially affected the cell’s attachment and spreading on plastic but cells recovered after a brief period of time. When cell proliferation was determined using 3-(4,5-dimethylthiazol-2-yl)-2,5-diphenyltetrazolium bromide assays, we noticed a small but significant increase in growth rates with PTEN reduction. The size of individual cells appeared larger when compared to control cells. Differentiation properties of these osteoblasts were increased as evidenced by higher expression of several of the bone markers tested (alkaline phosphatase, osteocalcin, osterix, bone morphogenetic protein 2, Cbfa1, osteoprotegerin, and receptor activator of NF-kappaB ligand) and their mineralization capacity in culture. As stabilization of beta-catenin is known to be responsible for growth deregulation with PTEN loss in other cell types, we investigated the activation of the canonical Wnt pathway in our cell lines. Immunofluorescence staining, protein expression in subcellular fractions for beta-catenin, and assays for activation of the canonical Wnt/beta-catenin signaling were studied in the PTEN downregulated cells. There was an overall decrease in β-catenin expression in cells with PTEN knockdown. The distribution of β-catenin was more diffuse within the cell in the PTEN-reduced clones when compared to controls where they were mostly present in cell borders. Signaling through the canonical pathway was also reduced in the PTEN knockdown cells when compared to control. The results of this study suggest that while decreased PTEN augments cell proliferation and positively affects differentiation, there is a decrease in β-catenin levels and activity in osteoblasts. Therefore, at least in osteoblasts, β-catenin is not responsible for mediating the activation of osteoblast differentiation with reduction in PTEN function.