Osteoblasts and adipocytes originate from common mesenchymal progenitor cells. We have investigated whether mouse osteoblastic MC3T3-E1 cells can be induced to transdifferentiate into mature adipocytes by the ectopic expression of adipogenic transcription factors, PPARgamma, C/EBPalpha, or both. Retrovirus-mediated overexpression of PPARgamma alone or both PPARgamma and C/EBPalpha resulted in reduced alkaline phosphatase activity and osteoblast-specific gene expression. Moreover, foci of adipocytes were identified in conditions favoring osteoblastic maturation. Upon treatment with insulin, dexamethasone, and IBMX, cells overexpressing PPARgamma alone or both PPARgamma and C/EBPalpha showed marked transdifferentiation to mature adipocytes expressing molecular markers of adipocytes. Cells expressing both PPARgamma and C/EBPalpha showed more robust phenotype of adipocytes than the cells expressing PPARgamma alone. Overexpression of C/EBPalpha alone did not result in adipogenesis. These results suggest that PPARgamma is a key molecular switch for the transdifferentiation to adipocytes whereas C/EBPalpha may differentiate MC3T3-E1 cells into osteoblasts and adipocytes. (C) 2004 Elsevier Inc. All rights reserved.