Recent studies suggest that adipose tissue contains pluripotent cells that are similar to those derived from other tissues, such as bone marrow. Mesenchymal cells isolated from adipose tissue are capable of differentiating along osteogenic, chondrogenic, myogenic, adipogenic and possibly neuronal lineages. Current knowledge of adipose-derived mesenchymal cells is reviewed, with a particular focus on efforts to direct these cells towards bone formation. Cell-based therapies using adipose tissue are anticipated to be of great clinical interest for skeletal tissue repair and regeneration.