Signal transducer and activator of transcription 1 (Stat1) is a critical mediator of gene transcription in type I interferon (IFN-alpha/beta) signaling that is essential for host defense against viruses. In the skeletal system, type I IFNs (IFN-alpha/beta) also play an important physiological role in the inhibition of receptor activator of NF-kappaB ligand (RANKL)-induced osteoclast differentiation and bone resorption: mice deficient in IFN signaling exhibit decreased bone mass accompanied by the activation of osteoclastogenesis. On the other hand, an unexpected increase in bone mass was observed in Stat1-deficient mice, indicating that Stat1 has a hitherto unknown function in the regulation of bone formation. Indeed, Stat1 was found to have a unique, non-canonical function as a cytoplasmic attenuator of Runx2, a key transcription factor for osteoblast differentiation. Thus, the loss of Stat1 results in excessive activation of Runx2 and osteoblast differentiation, thereby tipping the balance in favor of bone formation over bone resorption. This is an interesting example in which a latent transcription factor attenuates the activity of another transcription factor in the cytoplasm, and reveals a novel regulatory mechanism of bone remodeling by immunomodulatory molecules. Here, we summarize recent advances in the study of Stat1 and IFNs in the context of osteoimmunology, including latest reports that question whether the inhibitory function of Stat1 in chondrocytes is responsible for dwarfism in achondroplasia.