Human genetic disorders sharing the common feature of subcutaneous heterotopic ossification (HO) are caused by heterozygous inactivating mutations in GNAS, a gene encoding multiple transcripts including two stimulatory G proteins, the α subunit of the stimulatory G protein (G_sα) of adenylyl cyclase, and the extralong form of G_sα, XLαs. In one such disorder, progressive osseous heteroplasia (POH), bone formation initiates within subcutaneous fat before progressing to deeper tissues, suggesting that osteogenesis may involve abnormal differentiation of mesenchymal precursors that are present in adipose tissues. We determined by immunohistochemical analysis that GNAS protein expression is limited to G_sα in bone‐lining cells and to G_sα and XLαs in osteocytes. By contrast, the GNAS proteins G_sα, XLαs, and NESP55 are detected in adipocytes and in adipose stroma. Although Gnas transcripts, as assessed by quantitative RT‐PCR, show no significant changes on osteoblast differentiation of bone‐derived precursor cells, the abundance of these transcripts is enhanced by osteoblast differentiation of adipose‐derived mesenchymal progenitors. Using a mouse knockout model, we determined that heterozygous inactivation of Gnas (by disruption of the G_sα‐specific exon 1) abrogates upregulation of multiple Gnas transcripts that normally occurs with osteoblast differentiation in wild‐type adipose stromal cells. These transcriptional changes in Gnas^+/− mice are accompanied by accelerated osteoblast differentiation of adipose stromal cells in vitro. In vivo, altered osteoblast differentiation in Gnas^+/− mice manifests as subcutaneous HO by an intramembranous process. Taken together, these data suggest that Gnas is a key regulator of fate decisions in adipose‐derived mesenchymal progenitor cells, specifically those which are involved in bone formation. © 2011 American Society for Bone and Mineral Research