Bone marrow mesenchymal stem cells (MSCs) are heterogeneous osteo-progenitors that are mainly responsible for bone regeneration and homeostasis. In vivo, a subpopulation of bone marrow MSCs persists in a quiescent state, providing a source of new cells for repair. Previously, we reported that induction of quiescence in hMSCs in vitro skews their differentiation potential in favour of osteogenesis while suppressing adipogenesis. Herein, we uncover a new role for a protein tyrosine phosphatase, receptor type U (PTPRU) in repressing osteogenesis during quiescence. A 75 kD PTPRU protein isoform was found to be specifically induced during quiescence and down-regulated during cell cycle reactivation. Using siRNA-mediated knockdown, we report that in proliferating hMSC, PTPRU preserves self-renewal, while in quiescent hMSC, PTPRU not only maintains reversibility of cell cycle arrest but also suppresses expression of osteogenic lineage genes. Knockdown of PTPRU in proliferating or quiescent hMSC de-represses osteogenic markers, and enhances induced osteogenic differentiation. We also show that PTPRU positively regulates a β-catenin-TCF transcriptional reporter. Taken together, our study suggests a role for a quiescence-induced 75kD PTPRU isoform in modulating bone differentiation in hMSC, potentially involving the Wnt pathway.