Protracted inhibition of osteoblast (OB) differentiation characterizes multiple myeloma (MM) bone disease and persists even when patients are in long-term remission. However, the underlying pathophysiology for this prolonged OB suppression is unknown. Therefore, we developed a mouse MM model in which the bone marrow stromal cells (BMSCs) remained unresponsive to OB differentiation signals after removal of MM cells. We found that BMSCs from both MM-bearing mice and MM patients had increased levels of the transcriptional repressor Gfi1 compared with controls and that Gfi1 was a novel transcriptional repressor of the critical OB transcription factor Runx2. Trichostatin-A blocked the effects of Gfi1, suggesting that it induces epigenetic changes in the Runx2 promoter. MM-BMSC cell-cell contact was not required for MM cells to increase Gfi1 and repress Runx2 levels in MC-4 before OBs or naive primary BMSCs, and Gfi1 induction was blocked by anti–TNF-α and anti–IL-7 antibodies. Importantly, BMSCs isolated from Gfi1^−/− mice were significantly resistant to MM-induced OB suppression. Strikingly, siRNA knockdown of Gfi1 in BMSCs from MM patients significantly restored expression of Runx2 and OB differentiation markers. Thus, Gfi1 may have an important role in prolonged MM-induced OB suppression and provide a new therapeutic target for MM bone disease.