Excessive accumulation of bone marrow adipocytes observed in senile osteoporosis or age-related osteopenia is caused by the unbalanced differentiation of MSCs into bone marrow adipocytes or osteoblasts. Several transcription factors are known to regulate the balance between adipocyte and osteoblast differentiation. However, the molecular mechanisms that regulate the balance between adipocyte and osteoblast differentiation in the bone marrow have yet to be elucidated. To identify candidate genes associated with senile osteoporosis, we performed genome-wide expression analyses of differentiating osteoblasts and adipocytes. Among transcription factors that were enriched in the early phase of differentiation, Id4 was identified as a key molecule affecting the differentiation of both cell types. Experiments using bone marrow-derived stromal cell line ST2 and Id4-deficient mice showed that lack of Id4 drastically reduces osteoblast differentiation and drives differentiation toward adipocytes. On the other hand knockdown of Id4 in adipogenic-induced ST2 cells increased the expression of Pparγ2, a master regulator of adipocyte differentiation. Similar results were observed in bone marrow cells of femur and tibia of Id4-deficient mice. However the effect of Id4 on Pparγ2 and adipocyte differentiation is unlikely to be of direct nature. The mechanism of Id4 promoting osteoblast differentiation is associated with the Id4-mediated release of Hes1 from Hes1-Hey2 complexes. Hes1 increases the stability and transcriptional activity of Runx2, a key molecule of osteoblast differentiation, which results in an enhanced osteoblast-specific gene expression. The new role of Id4 in promoting osteoblast differentiation renders it a target for preventing the onset of senile osteoporosis.