The discovery that two rare autosomal recessive high bone mass conditions were caused by the loss of sclerostin expression prompted studies into its role in bone homeostasis. In this article, we aim to bring together the wealth of information relating to sclerostin in bone though discussion of rare human disorders in which sclerostin is reduced or absent, sclerostin manipulation via genetic approaches and treatment with antibodies that neutralise sclerostin in animal models and in human. Together, these findings demonstrate the importance of sclerostin as a regulator of bone homeostasis and provide valuable insights into its biological mechanism of action. We summarise the current state of knowledge in the field, including the current understanding of the direct effects of sclerostin on the canonical WNT signalling pathway and the actions of sclerostin as an inhibitor of bone formation. We review the effects of sclerostin, and its inhibition, on bone at the cellular and tissue level and discuss new findings that suggest that sclerostin may also regulate adipose tissue. Finally, we highlight areas in which future research is expected to yield additional insights into the biology of sclerostin.