Low-dose hormone replacement therapy (HRT) in postmenopausal women may produce fewer side-effects but its efficacy in the prevention of bone loss and osteoporosis is not established. To address this we compared the effect of 1 mg estradiol-17β with a 2 mg dose, in combination with cyclical dydrogesterone, in the prevention of postmenopausal bone loss. We conducted a multicenter double-masked prospective randomized, placebo-controlled study in 595 apparently healthy postmenopausal women randomized to either placebo, or continuous oral estradiol-17β 1 mg or 2 mg with sequential dydrogesterone for 2 years. The primary endpoint was the percentage change from baseline in bone mineral density (BMD) in the lumbar spine (LS) and femoral neck (FN) of actively treated groups compared with placebo. Women taking either 1 mg or 2 mg estradiol-17β showed a significant increase in BMD of the LS (mean ± SD, 5.2 ± 3.8% and 6.7 ± 4.0% respectively, both p <0.001) whilst BMD in the placebo group decreased (–1.9 ± 4.0%). Increases were also observed in FN BMD in both treated groups (2.7 ± 4.2% and 2.5 ± 5.2% respectively, both p <0.001) in contrast to the placebo group (–1.8 ± 4.8%). The oldest women showed the greatest treatment response. One milligram estradiol-17β in combination with dydrogesterone is effective in conserving LS and proximal femur bone mass, both of which are clinically important sites of osteoporotic fracture, and is as effective as 2 mg in preventing FN bone. The lower dose of estradiol-17β is a particularly suitable treatment for osteoporosis management in older women since it should minimize side-effects and improve the acceptability of HRT.