The ubiquitously expressed calpains-1 and -2 belong to a family of calcium-dependent intracellular cysteine proteases. Both calpains are heterodimers consisting of a large catalytic subunit and a small regulatory subunit encoded by the gene Capn4. Ablation of the calpain small subunit eliminates calpain activity and leads to embryonic lethality. We previously created osteoblast-specific Capn4 knockout mice to investigate a physiological role for the calpain small subunit in cells of the osteoblast lineage. Deletion of Capn4 reduced trabecular and cortical bone, mainly due to impaired proliferation and differentiation of cells of the osteoblast lineage. To further investigate an underlining mechanism by which osteoblast-specific Capn4 knockout mice develop an osteoporotic bone phenotype, we established osteoblastic cell lines stably expressing either control or Capn4 RNA interference for this study. Capn4 knockdown cells showed reduced cell proliferation, accumulation of total and phosphorylated cyclin-dependent kinase inhibitor 1B (p27(Kip1)) on serine 10, and reduced phosphorylation of retinoblastoma protein on threonine 821. Moreover, ablation of Capn4 increased 27 ( Kip1 ) mRNA levels, likely due to stabilized binding of Akt to protein phosphatase 2A, which presumably results in reduced phosphorylation of Akt on S473 and forkhead Box O (FoxO) 3A on T32. Collectively, calpain regulates cell proliferative function by modulating both transcription and degradation of p27(Kip1) in osteoblasts. In conclusion, calpain is a critical modulator for regulation of p27(Kip1) in cells of the osteoblast lineage.