Osteocytes are the most abundant osteoblast lineage cells within the bone matrix. They respond to mechanical stimulation and can participate in the release of regulatory proteins that can modulate the activity of other bone cells. We hypothesize that neuropeptide Y (NPY), a neurotransmitter with regulatory functions in bone formation, is produced by osteocytes and can affect osteoblast activity. To study the expression of NPY by the osteoblast lineage cells, we utilized transgenic mouse models in which we can identify and isolate populations of osteoblasts and osteocytes. The Col2.3GFP transgene is active in osteoblasts and osteocytes, while the DMP1 promoter drives green fluorescent protein (GFP) expression in osteocytes. Real-time PCR analysis of RNA from the isolated populations of cells derived from neonatal calvaria showed higher NPY mRNA in the preosteocytes/osteocytes fraction compared to osteoblasts. NPY immunostaining confirmed the strong expression of NPY in osteocytes (DMP1GFP+), and lower levels in osteoblasts. In addition, the presence of NPY receptor Y1 mRNA was detected in cavaria and long bone, as well as in primary calvarial osteoblast cultures, whereas Y2 mRNA was restricted to the brain. Furthermore, NPY expression was reduced by 30–40% in primary calvarial cultures when subjected to fluid shear stress. In addition, treatment of mouse calvarial osteoblasts with exogenous NPY showed a reduction in the levels of intracellular cAMP and markers of osteoblast differentiation (osteocalcin, BSP, and DMP1). These results highlight the potential regulation of osteoblast lineage differentiation by local NPY signaling. J. Cell. Biochem. 108: 621–630, 2009. © 2009 Wiley-Liss, Inc.