Both bone mass and serum leptin levels are increased in obesity. Because osteoblasts and adipocytes arise from a common precursor in bone marrow, we assessed the effects of human recombinant leptin on a conditionally immortalized human marrow stromal cell line, hMS2–12, with the potential to differentiate to either the osteoblast or adipocyte phenotypes. By RT-PCR and Western immunoblot analysis, the hMS2–12 cells expressed messenger RNA (mRNA) and protein for the leptin receptor. Leptin did not affect hMS2–12 cell proliferation, but resulted in dose- and time-dependent increases in mRNA and protein levels of alkaline phosphatase, type I collagen, and osteocalcin, and in a 59% increase in mineralized matrix. Leptin increased mRNA levels of lipoprotein lipase at 3 days, but decreased mRNA levels of adipsin and leptin at 9 days and decreased lipid droplet formation by 50%. Leptin did not affect the expression of Cbfa1 or peroxisome proliferator-activated receptor-γ₂, transcription factors involved in commitment to the osteoblast and adipocyte pathways, respectively. Thus, leptin acts on human marrow stromal cells to enhance osteoblast differentiation and to inhibit adipocyte differentiation. Our data support the hypothesis that leptin is a previously unrecognized, physiological regulator of these two differentiation pathways, acting primarily on maturation of stromal cells into both lineages.