Vascular endothelial growth factor (VEGF) and beta-catenin both act broadly in embryogenesis and adulthood, including in the skeletal and vascular systems. Increased or deregulated activity of these molecules has been linked to cancer and bone-related pathologies. By using novel mouse models to locally increase VEGF levels in the skeleton, we found that embryonic VEGF over-expression in osteo-chondroprogenitors and their progeny largely pheno-copied constitutive beta-catenin activation. Adult induction of VEGF in these cell populations dramatically increased bone mass, associated with aberrant vascularization, bone marrow fibrosis and haematological anomalies. Genetic and pharmacological interventions showed that VEGF increased bone mass through a VEGF receptor 2- and phosphatidyl inositol 3-kinase-mediated pathway inducing beta-catenin transcriptional activity in endothelial and osteoblastic cells, likely through modulation of glycogen synthase kinase 3-beta phosphorylation. These insights into the actions of VEGF in the bone and marrow environment underscore its power as pleiotropic bone anabolic agent but also warn for caution in its therapeutic use. Moreover, the finding that VEGF can modulate beta-catenin activity may have widespread physiological and clinical ramifications.