We investigated whether de-differentiated fat (DFAT) cells, a mature adipocyte-derived preadipocyte cell line, can be induced to trans-differentiate into osteoblasts in vitro and in vivo. All-trans retinoic acid (RA) induced expression of osteoblast-specific mRNAs encoding Cbfa1/Runx2, osterix, alkaline phosphatase, osteopontin, parathyroid hormone receptor, and osteocalcin in the DFAT cells, but did not induce the expression of adipocyte-specific mRNAs encoding PPARgamma2, C/EBPalpha, and GLUT4. Moreover, alkaline phosphatase activity was expressed in DFAT cells and the cells underwent mineralization of the bone matrix in vitro. Furthermore, when DFAT cells were transplanted subcutaneously into C57BL/6N mice in diffusion chambers, these cells formed ectopic osteoid tissue without any host cell-invasion of the chambers. These results indicate that DFAT cells derived from mature adipocytes can be converted into fully differentiated osteoblasts in vitro and in vivo using RA. DFAT cells provide a unique model for studying the lineage commitment of the adipocytes and osteoblasts derived from mesenchymal stem cells. Identification of the pathways that regulate these processes could lead to the development of new therapeutic strategies for control of unwarranted growth of bone and adipose tissue.