Osteosarcoma (OS) is the most frequent pediatric malignant bone tumor that has a high propensity for metastases. Through osteoblast-specific alteration of p53 status, we developed a genetically engineered mouse model of localized and metastatic OS to gain an understanding into the molecular pathogenesis of OS. Microarray analysis of both localized tumors and metastatic tumors identified the downregulation of the naked cuticle homolog 2 (NKD2) gene, a negative regulator of Wnt signaling. Overexpression of NKD2 in metastatic human and mouse OS cells significantly decreases cell proliferation, migration and invasion ability in vitro and drastically diminishes OS tumor growth and metastasis in vivo, whereas downregulation enhances migratory and invasive potential. Evaluation of NKD2-overexpressing tumors revealed upregulation of tumor-suppressor genes and downregulation of molecules involved in blood vessel formation and cell migration. Furthermore, assessment of primary human OS revealed downregulation of NKD2 in metastatic and recurrent OS. Finally, we provide biological evidence that use of small-molecule inhibitors targeting the Wnt pathway can have therapeutic efficacy in decreasing metastatic properties in OS. Our studies provide compelling evidence that downregulation of NKD2 expression and alterations in associated regulated pathways have a significant role in driving OS tumor growth and metastasis.