Blocking the Wnt inhibitor, sclerostin, increases the rate of bone formation in rodents and in humans. On a cellular level, the antibody against sclerostin acts by increasing osteoblast numbers partly by activating the quiescent bone‐lining cells in vivo. No evidence currently exists, to determine whether blocking sclerostin affects early cells of the osteoblast lineage. Here we use a lineage‐tracing strategy that uses a tamoxifen‐dependent cre recombinase, driven by the Sox9 promoter to mark early cells of the osteoblast lineage. We show that, when adult mice are treated with the rat‐13C7, an antibody that blocks sclerostin action in rodents, it increases the numbers of osteoblast precursors and their differentiation into mature osteoblasts in vivo. We also show that rat‐13C7 administration suppresses adipogenesis by suppressing the differentiation of Sox9creER+ skeletal precursors into bone marrow adipocytes in vivo. Using floxed alleles of the CTNNB1 gene encoding β‐catenin, we show that these precursor cells express the canonical Wnt signaling mediator, β‐catenin, and that the actions of the rat‐13C7 antibody to increase the number of early precursors is dependent on direct stimulation of Wnt signaling. The increase in osteoblast precursors and their progeny after the administration of the antibody leads to a robust suppression of apoptosis without affecting the rate of their proliferation. Thus, neutralizing the Wnt‐inhibitor sclerostin increases the numbers of early cells of the osteoblast lineage osteoblasts and suppresses their differentiation into adipocytes in vivo.