Mutations in distant regulatory elements can negatively impact human development and health, yet due to 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 disease (VB), a severe sclerosing bone dysplasia. Using BAC recombination and transgenesis we characterized the expression of human sclerostin (sost) from normal (hSOSTwt) or Van Buchem(hSOSTvb D) alleles. Only the hSOSTwt allele faithfully expressed high levels of human sost in the adult bone and impacted 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 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.