Increasing evidence uncover the essential role of long noncoding RNA (lncRNAs) in bone metabolism and the association of lncRNA with genetic risk of osteoporosis. However, whether lncRNA nuclear paraspeckle assembly transcript 1 (Neat1) is involved remains largely unknown. In the present study, we found that Neat1 is induced by osteoclastic differentiation stimuli. Knockdown of Neat1 attenuates osteoclast formation whereas overexpression of Neat1 accelerates osteoclast formation. In vivo evidence showed that enhanced Neat1 expression stimulates osteoclastogenesis and reduces bone mass in mice. Mechanically, Neat1 competitively binds with microRNA 7 (miR‐7) and blocks its function for regulating protein tyrosine kinase 2 (PTK2). Intergenic SNP rs12789028 acts as allele‐specific long‐range enhancer for NEAT1 via chromatin interactions. We establish for the first time that Neat1 plays an essential role in osteoclast differentiation, and provide genetic mechanism underlying the association of NEAT1 locus with osteoporosis risk. These results enrich the current knowledge of NEAT1 function, and uncover the potential of NEAT1 as a therapeutic target for osteoporosis.