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, PPARγ, C/EBPα, or both. Retrovirus-mediated overexpression of PPARγ alone or both PPARγ and C/EBPα 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 PPARγ alone or both PPARγ and C/EBPα showed marked transdifferentiation to mature adipocytes expressing molecular markers of adipocytes. Cells expressing both PPARγ and C/EBPα showed more robust phenotype of adipocytes than the cells expressing PPARγ alone. Overexpression of C/EBPα alone did not result in adipogenesis. These results suggest that PPARγ is a key molecular switch for the transdifferentiation to adipocytes whereas C/EBPα may differentiate MC3T3-E1 cells into osteoblasts and adipocytes.