Tumor suppressor p53 is activated in response to genotoxic stress by Atm and other PI3K-like kinases, which phosphorylate p53 and stabilize p53 (Barlow et al., 1997), leading to cell cycle arrest, senescence, or apoptosis (Sherr, 1998). As such, p53 and Atm have similar functions in DNA damage response and tumor suppression. Yet recent mouse genetic studies revealed that p53 and Atm play opposite roles in osteogenic differentiation and bone formation, with p53−/− mice showing osteosclerotic phenotypes, whereas Atm−/− mice showing osteoporotic phenotypes (Rasheed et al., 2006; Wang et al., 2006). However, the molecular mechanism by which Atm and p53 differentially regulate osteogenic differentiation and bone homeostasis is still elusive. Using primary osteoblast cultures and knockout mouse models, we show that p53 deficiency leads to an increase in Smad1 expression via the p21–E2F1 pathway, which mediated the enhanced osteogenic differentiation of p53−/− cells, while Atm−/− osteoblasts show elevated p53 and p21 expression and compromised BMP–Smad1 signaling. Deletion of p53 reversed these alterations in Atm−/− osteoblasts and mice. This study reveals an epistatic Atm–p53 interaction that is distinct from that in genotoxic stress response and tumor suppression and uncovers a link between Atm–p53 and BMP–Smad1 signaling, by which Atm–p53 regulate osteogenic differentiation.