Fragility fractures are recognized complication of diabetes, but yet the underlying mechanisms remain poorly understood. This is particularly pronounced in type 2 diabetes in which the propensity to fall is increased but bone mass is not necessarily low. Thus, whether factors implicated in the development of insulin resistance and diabetes directly impact on the musculoskeletal system remains to be investigated. PPARβ^−/− mice have reduced metabolic activity and are glucose intolerant. We examined changes in bone and muscle in PPARβ^−/− mice and investigated both the mechanism behind those changes with age as well as their response to exercise. Compared with their wild type, PPARβ^−/− mice had an accelerated and parallel decline in both muscle and bone strength with age. These changes were accompanied by increased myostatin expression, low bone formation, and increased resorption. In addition, mesenchymal cells from PPARβ^−/− had a reduced proliferation capacity and appeared to differentiate into more of an adipogenic phenotype. Concomitantly we observed an increased expression of PPARγ, characteristic of adipocytes. The anabolic responses of muscle and bone to exercise were also diminished in PPARβ^−/− mice. The periosteal bone formation response to direct bone compression was, however, maintained, indicating that PPARβ controls periosteal bone formation through muscle contraction and/or metabolism. Taken together, these data indicate that PPARβ deficiency leads to glucose intolerance, decreased muscle function, and reduced bone strength. On a molecular level, PPARβ appears to regulate myostatin and PPARγ expression in muscle and bone, thereby providing potential new targets to reverse bone fragility in patients with metabolic disturbances.