The proteasome inhibitor bortezomib has a striking clinical benefit in patients with multiple myeloma. It is unknown whether the bone marrow microenvironment directly contributes to the dramatic response of myeloma cells to proteasome inhibition in vivo. We have used the well-characterized 5TGM1 murine model of myeloma to investigate myeloma growth within bone and response to the proteasome inhibitor bortezomib in vivo. Myeloma cells freshly isolated from the bone marrow of myeloma-bearing mice were found to have an increase in proteasome activity and an enhanced response to in vitro proteasome inhibition, as compared with pre-inoculation myeloma cells. Treatment of myeloma-bearing mice with bortezomib resulted in a greater reduction in tumor burden when the myeloma cells were located within the bone marrow when compared with extra-osseous sites. Our results demonstrate that myeloma cells exhibit an increase in proteasome activity and an enhanced response to bortezomib treatment when located within the bone marrow microenvironment in vivo.