The central nervous system regulates activity of peripheral organs through interoception. In our previous study, we have demonstrated that PGE2/EP4 skeleton interception regulate bone homeostasis. Here, we show that ascending skeleton interoceptive signaling downregulates expression of hypothalamic neuropeptide Y (NPY) and induce lipolysis of adipose tissue for osteoblastic bone formation. Specifically, the ascending skeleton interoceptive signaling induces expression of small heterodimer partner-interacting leucine zipper protein (SMILE) in the hypothalamus. SMILE binds to pCREB as a transcriptional heterodimer on Npy promoters to inhibit NPY expression. Knockout of EP4 in sensory nerve increases expression of NPY causing bone catabolism and fat anabolism. Importantly, inhibition of NPY Y1 receptor (Y1R) accelerated oxidation of free fatty acids in osteoblasts and rescued bone loss in Avil^Cre:Ptger4^fl/fl mice. Thus, downregulation of hypothalamic NPY expression lipolyzes free fatty acids for anabolic bone formation through a neuroendocrine descending interoceptive regulation.