Bone loss in type 1 diabetes is accompanied by increased marrow fat, which could directly reduce osteoblast activity or result from altered bone marrow mesenchymal cell lineage selection (adipocyte vs. osteoblast). CCAAT/enhancer binding protein beta (C/EBPβ) is an important regulator of both adipocyte and osteoblast differentiation. C/EBPβ-null mice have delayed bone formation and defective lipid accumulation in brown adipose tissue. To examine the balance of C/EBPβ functions in the diabetic context, we induced type 1 diabetes in C/EBPβ-null (knockout, KO) mice. We found that C/EBPβ deficiency actually enhanced the diabetic bone phenotype. While KO mice had reduced peripheral fat mass compared with wild-type mice, they had 5-fold more marrow adipocytes than diabetic wild-type mice. The enhanced marrow adiposity may be attributed to compensation by C/EBPδ, peroxisome proliferator-activated receptor-γ2, and C/EBPα. Concurrently, we observed reduced bone density. Relative to genotype controls, trabecular bone volume fraction loss was escalated in diabetic KO mice (-48%) compared with changes in diabetic wild-type mice (-22%). Despite greater bone loss, osteoblast markers were not further suppressed in diabetic KO mice. Instead, osteoclast markers were increased in the KO diabetic mice. Thus, C/EBPβ deficiency increases diabetes-induced bone marrow (not peripheral) adipose depot mass, and promotes additional bone loss through stimulating bone resorption. C/EBPβ-deficiency also reduced bone stiffness and diabetes exacerbated this (two-way ANOVA P < 0.02). We conclude that C/EBPβ alone is not responsible for the bone vs. fat phenotype switch observed in T1 diabetes and that suppression of CEBPβ levels may further bone loss and decrease bone stiffness by increasing bone resorption.