The precise role of bone marrow adipose tissue (BMAT) in the marrow remains unknown. The purpose of the present study was therefore to describe a novel method for studying BMAT using 3-D collagen gel culture of BMAT fragments, immunohistochemistry, ELISA and real-time reverse transcription-polymerase chain reaction. Mature adipocytes and CD45+ leukocytes were retained for >3 weeks. Bone marrow stromal cells (BMSC) including a small number of lipid-laden preadipocytes and CD44+/CD105+ mesenchymal stem cell (MSC)-like cells, developed from BMAT. Dexamethasone (10 micromol/L), but not insulin (20 mU/mL), significantly increased the number of preadipocytes. Dexamethasone and insulin also promoted leptin production and gene expression in BMAT. Adiponectin production by BMAT was <0.8 ng/mL under all culture conditions. Dexamethasone promoted adiponectin gene expression, while insulin inhibited it. This finding suggests that dexamethasone, but not insulin, may serve as a powerful adipogenic factor for BMAT, in which adiponectin protein secretion is normally very low, and that BMAT may exhibit a different phenotype from that of the visceral and subcutaneous adipose tissues. BMAT-osteoblast interactions were also examined, and it was found that osteoblasts inhibited the development of BMSC and reduced leptin production, while BMAT inhibited the growth and differentiation of osteoblasts. The present novel method proved to be useful for the study of BMAT biology.