Erythropoietin (Epo) has been used in the treatment of anemia resulting from numerous etiologies, including renal disease and cancer. However, its effects are controversial and the expression pattern of the Epo receptor (Epo-R) is debated. Using in vivo lineage tracing, we document that within the hematopoietic and mesenchymal lineage, expression of Epo-R is essentially restricted to erythroid lineage cells. As expected, adult mice treated with a clinically relevant dose of Epo had expanded erythropoiesis because of amplification of committed erythroid precursors. Surprisingly, we also found that Epo induced a rapid 26% loss of the trabecular bone volume and impaired B-lymphopoiesis within the bone marrow microenvironment. Despite the loss of trabecular bone, hematopoietic stem cell populations were unaffected. Inhibition of the osteoclast activity with bisphosphonate therapy blocked the Epo-induced bone loss. Intriguingly, bisphosphonate treatment also reduced the magnitude of the erythroid response to Epo. These data demonstrate a previously unrecognized in vivo regulatory network coordinating erythropoiesis, B-lymphopoiesis, and skeletal homeostasis. Importantly, these findings may be relevant to the clinical application of Epo.