Aims. Circular RNAs (circRNAs) are a novel type of non-coding RNA that plays major roles in the development of diverse diseases including osteonecrosis of the femoral head (ONFH). Here, we explored the impact of hsa_circ_0066523 derived from forkhead box P1 (FOXP1) (also called circFOXP1) on bone mesenchymal stem cells (BMSCs), which is important for ONFH development. Methods. RNA or protein expression in BMSCs was analyzed by quantitative real-time polymerase chain reaction (qRT-PCR) or western blot, respectively. Cell Counting Kit 8 (CCK8) and 5-ethynyl-2’-deoxyuridine (EdU) were used to analyze cell proliferation. Alkaline phosphatase (ALP) activity, ALP staining, and Alizarin Red S staining were employed to evaluate the osteoblastic differentiation. Chromatin immunoprecipitation (ChIP), luciferase reporter, RNA pull down, and RNA immunoprecipitation (RIP) assays were combined for exploring molecular associations. Results. Circ_0066523 was upregulated in osteogenic induction process of BMSCs. Silencing circ_0066523 restrained the proliferation and osteogenic differentiation of BMSCs. Mechanistically, circ_0066523 activated phosphatidylinositol-4,5-bisphosphate 3-kinase / AKT serine/threonine kinase 1 (PI3K/AKT) pathway via recruiting lysine demethylase 5B (KDM5B) to epigenetically repress the transcription of phosphatase and tensin homolog (PTEN). Functionally, AKT signalling pathway agonist or PTEN knockdown counteracted the effects of silenced circ_0066523 on BMSC proliferation and differentiation. Conclusion. Circ_0066523 promotes the proliferation and differentiation of BMSCs by epigenetically repressing PTEN and therefore activating AKT pathway. This finding might open new avenues for the identification of therapeutic targets for osteoblast differentiation related diseases such as ONFH. Cite this article: Bone Joint Res 2021;10(8):526–535