Ethanol extract of Lycii radicis cortex (LRC) prevented the loss of bone mineral density in ovariectomized mice by promoting the differentiation of osteoblast linage cells. In this study, I performed fractionation and isolation of the bioactive compound(s) responsible for the bone formation–enhancing effect of LRC extract. A known sesquiterpene glucoside, (1ʹR,3ʹS,5ʹR,8ʹS,2Z,4E)-dihydrophaseic acid 3ʹ-O-β-D-glucopyranoside (abbreviated as DPA3G), was isolated and identified as a candidate constituent. I investigated the effects of DPA3G on osteoblast and osteoclast differentiation, which play fundamental roles in bone formation and bone resorption, respectively, in bone remodeling. The DPA3G fraction treatment in mesenchymal stem cell line C3H10T1/2 and preosteoblast cell line MC3T3-E1 significantly enhanced cell proliferation and alkaline phosphatase activity in both cell lines compared to the untreated control cells. Furthermore, DPA3G significantly increased mineralized nodule formation and the mRNA expression of osteoblastogenesis markers, Alpl, Runx2, and Bglap, in MC3T3-E1 cells. The DPA3G treatment, however, did not influence osteoclast differentiation in primary-cultured monocytes of mouse bone marrow. Because osteoblastic and osteoclastic precursor cells coexist in vivo, I tested the DPA3G effects under the co-culture condition of MC3T3-E1 cells and monocytes. Remarkably, DPA3G enhanced not only osteoblast differentiation of MC3T3-El cells but also osteoclast differentiation of monocytes, indicating that DPA3G plays a role in the maintenance of the normal bone remodeling balance.