Mutations in distant regulatory elements can have a negative impact on human development and health, yet because of the difficulty of detecting these critical sequences, we predominantly focus on coding sequences for diagnostic purposes. We have undertaken a comparative sequence-based approach to characterize a large noncoding region deleted in patients affected by Van Buchem (VB) disease, a severe sclerosing bone dysplasia. Using BAC recombination and transgenesis, we characterized the expression of human sclerostin (SOST) from normal (SOST^wt) or Van Buchem (SOST^vbΔ) alleles. Only the SOST^wt allele faithfully expressed high levels of human SOST in the adult bone and had an impact on bone metabolism, consistent with the model that the VB noncoding deletion removes a SOST-specific regulatory element. By exploiting cross-species sequence comparisons with in vitro and in vivo enhancer assays, we were able to identify a candidate enhancer element that drives human SOST expression in osteoblast-like cell lines in vitro and in the skeletal anlage of the embryonic day 14.5 (E14.5) mouse embryo, and discovered a novel function for sclerostin during limb development. Our approach represents a framework for characterizing distant regulatory elements associated with abnormal human phenotypes.