Despite being unable to activate the cognate ghrelin receptor (GHS-R), unacylated ghrelin (UAG) possesses a unique activity spectrum that includes promoting bone marrow adipogenesis. Since a receptor mediating this action has not been identified, we re-appraised the potential interaction of UAG with GHS-R in the regulation of bone marrow adiposity. Surprisingly, the adipogenic effects of intra-bone marrow (ibm)-infused acylated ghrelin (AG) and UAG were abolished in male GHS-R-null mice. Gas chromatography showed that isolated tibial marrow adipocytes contain the medium-chain fatty acids utilised in the acylation of UAG, including octanoic acid. Additionally, immunohistochemistry and immunogold electron microscopy revealed that tibial marrow adipocytes show prominent expression of the UAG-activating enzyme ghrelin O-acyl transferase (GOAT), which is located in the membranes of lipid trafficking vesicles and in the plasma membrane. Finally, the adipogenic effect of ibm-infused UAG was completely abolished in GOAT-KO mice. Thus, the adipogenic action of exogenous UAG in tibial marrow is dependent upon acylation by GOAT and activation of GHS-R. This suggests that UAG is subject to target cell-mediated activation - a novel mechanism for manipulating hormone activity.