Lysosomal acid lipase (LAL) is essential for cholesteryl ester (CE) and triacylglycerol (TAG) hydrolysis in the lysosome. Clinically, an autosomal recessive LIPA mutation causes LAL deficiency (LAL—D), previously described as Wolman Disease or Cholesteryl Ester Storage Disease (CESD). LAL-D is associated with ectopic lipid accumulation in the liver, small intestine, spleen, adrenal glands, and blood. Considering the importance of unesterified cholesterol and fatty acids in bone metabolism, we hypothesized that LAL is essential for bone formation, and ultimately, skeletal health. To investigate the role of LAL in skeletal homeostasis, we used LAL-deficient (^−/−) mice, in vitro osteoblast cultures, and novel clinical data from LAL-D patients. Both male and female LAL^−/− mice demonstarted lower trabecular and cortical bone parameters , which translated to reduced biomechanical properties. Further histological analyses revealed that LAL^−/− mice had fewer osteoblasts, with no change in osteoclast or marrow adipocyte numbers. In studying the cell-autonomous role of LAL, we observed impaired differentiation of LAL^−/− calvarial osteoblasts and in bone marrow stromal cells treated with the LAL inhibitor lalistat. Consistent with LAL's role in other tissues, lalistat resulted in profound lipid puncta accumulation and an altered intracellular lipid profile. Finally, we analyzed a large de-identified national insurance database (i.e. 2016/2017 Optum Clinformatics®) which revealed that adults (≥18 years) with CESD (n = 3076) had a higher odds ratio (OR = 1.21;​ 95% CI = 1.03–1.41) of all-cause fracture at any location compared to adults without CESD (n = 13.7 M) after adjusting for demographic variables and osteoporosis. These data demonstrate that alterations in LAL have significant clinical implications related to fracture risk and that LAL's modulation of lipid metabolism is a critical for osteoblast function.