Inflammation affects bone repair and strongly impacts bone regeneration therapy. The transcription factor NFκB mediates inflammatory responses which exert regulatory effects on bone homeostasis. Concepts regarding the effect of inflammation on osteogenesis during bone development remain elusive. The current study investigated the influence of NFκB on osteogenesis through osteoblast regulation in vivo using a Cre-LoxP recombination strategy. Mice with p65 haploinsufficiency targeting osteoprogenitors were generated and the phenotypes were characterized. The mice lacking one p65 allele in osteogenic cells displayed reduced skeletal dimension, less bone mineralization and altered bone structure. Cellular assays provided evidence that reduced NFκB activities due to p65 haploinsufficiency resulted in decreased differentiation and elevated apoptosis in the osteogenic cells. Increased in situ apoptosis in bones from the mutant mice confirmed the protective role of NFκB in osteogenic cell survival. Lack of one p65 allele attenuated osteogenic potential of mesenchymal stem cells derived from the mutant mice. The heterotopic bone formation approach using BMP2 was employed to assess bone formation potential in the mice with p65 haploinsufficiency in osteoprogenitors. The p65 haploinsufficienty mice showed less newly formed bone in the BMP2-induced bone regeneration process in compared with the controls due to reduced osteoblast differentiation. In conclusion, NFκB modulates osteoblastic activities. Diminution of NFκB activities in osteoprogenitors retards bone development which alters skeletal size and bone architecture. Decreased osteoblastic differentiation and increased apoptosis in the p65 haploinsufficient osteogenic cells indicate that there are multiple levels which NFκB acts in control of bone formation.