Background: Common variants in the fat mass and obesity-related transcript (FTO) gene are related to body mass index and obesity, suggesting its potential association with bone mineral density (BMD) and fracture risk. This study sought to define the association between FTO gene variants and the following phenotypes: (1) BMD; (2) bone loss; and (3) fracture risk. Methods: This analysis was based on the Dubbo Osteoporosis Epidemiology Study that included 1,277 postmenopausal women aged ≥60 years living in Dubbo, Australia. BMD at the femoral neck and lumbar spine was measured biennially by dual energy X-ray absorptiometry (GE Lunar). Fractures were radiologically ascertained. Six single nucleotide polymorphisms (SNPs; rs1421085, rs1558902, rs1121980, rs17817449, rs9939609, and rs9930506) of the FTO gene were genotyped using TaqMan assay. Results: Women homozygous for the minor allele (GG) of rs9930506 had a significantly higher risk of hip fracture (adjusted hazard ratio, 1.93; 95% confidence interval, 1.15–3.23) than those homozygous for the major allele (AA) after adjusting for potential confounding effects. Similar associations were also observed for the minor allele of rs1121980. However, there was no significant association between the FTO SNPs and BMD or the rate of bone loss. Conclusions Common variations in the FTO gene are associated with a hip fracture risk in women, and the association is not mediated through BMD or bone loss.