One of the clinical features of multiple myeloma (MM) is the occurrence of skeletal events, which are characterized by increased bone resorption and decreased bone formation. In contrast to enhanced osteoclastogenesis, little is known about the mechanism of impaired bone formation in MM. Because TAZ, a Runx2/Cbfa1 transcriptional co-activator, has recently been shown to modulate mesenchymal stem cell (MSC) differentiation in favor of osteoblast differentiation, we investigated whether the regulation of TAZ expression played a role in the decreased bone formation of MM. We isolated and purified Flk-1(+)CD31(-)CD34(-) cells with MSC characters from bone marrow (BM) of myeloma patients and healthy donors. We found the osteogenic potential of the MSCs from myeloma patients decreased significantly, and TAZ expression of these cells was lower than that of healthy donors. Human myeloma cell lines (HMCLs) and CD138(+) myeloma cells (MCs) from myeloma patients inhibited osteogenesis of the MSCs from healthy volunteers, which were accompanied by a reduced TAZ expression and elevated TNF-alpha concentration in the supernatant of co-culture systems. The repressed osteogenesis and TAZ expression were both partially restored by neutralization of TNF-alpha. Thus, the decreased osteogenic potential of MSCs of myeloma patients was in part due to TNF-alpha suppressed TAZ expression.