PPARγ is activated by diverse ligands and regulates the differentiation of many cell types. Based on evidence that activation of PPARγ2 by rosiglitazone stimulates adipogenesis and inhibits osteoblastogenesis in U-33/γ2 cells, a model mesenchymal progenitor of adipocytes and osteoblasts, we postulated that the increase in marrow fat and the decrease in osteoblast number that occur during aging are due to increased PPARγ2 activation. Here, we show that the naturally occurring PPARγ ligands 9,10-dihydroxyoctadecenoic acid, and 15-deoxy-Δ^12,14-PGJ₂, also stimulate adipocytes and inhibit osteoblast differentiation of U-33/γ2 cells. Strikingly, 9,10-epoxyoctadecenoic acid and the thiazolidine acetamide ligand GW0072 [(±)-(2S,5S)-4-(4-(4-carboxyphenyl)butyl)-2-heptyl-4-oxo-5-thaizolidineN,N-dibenzyl-acetamide] prevent osteoblast differentiation, but do not stimulate adipogenesis, whereas 9-hydroxyoctadecadienoic acid stimulates adipogenesis but does not affect osteoblast differentiation. The divergent effects of PPARγ2 ligands on osteoblast and adipocyte differentiation were confirmed in primary murine bone marrow cultures using rosiglitazone and GW0072. These findings indicate that the proadipogenic and antiosteoblastogenic effects of PPARγ2 are mediated by distinct regulatory pathways that can be differentially modulated depending on the nature of the ligand, and they support the idea that increased fatty acid oxidation during aging may inhibit osteoblast differentiation. Moreover, there may be selective PPARγ2 modulators that block the adverse effects of fatty acid oxidation products while retaining beneficial activities such as insulin sensitization.