Cadmium (Cd) causes bone loss, concerning inhibiting osteogenic differentiation of bone marrow mesenchymal stem cells (BMSCs). Prunella vulgaris L. (PV) has the potential for promoting osteogenic differentiation, but its influence on Cd-induced bone loss is unclear. This study investigated the effect of PV aqueous extract (PVE) on Cd-induced bone loss and its underlying mechanisms. Eight-week-old female SD rats were randomly assigned into four groups and treated for 16 weeks: Control, Cd (50 mg/L of Cd chloride), Cd + PV Low (125 mg/kg bw of PVE), and Cd + PV High (250 mg/kg bw of PVE). PV ameliorated femoral bone loss in Cd-treated rats manifested as increases in bone mineral density, bone volume, trabecular thickness, number, and area, and decreases in trabecular separation. Compared with Cd group, PV-treatment groups had higher serum levels of bone formation markers (ALP, BGP). Additionally, in PV-treatment groups, expressions of bone formation markers (Osterix, Runx2) and molecules involved in osteogenic differentiation signal pathway BMP/Smad (BMP4, Smad1/5/9) in the tibia of rats and isolated rat primary BMSCs were upregulated. These results suggest that PV alleviates Cd-induced bone loss by promoting osteogenic differentiation, which is likely associated with BMP/Smad pathway.