Rosiglitazone (Rosi), a member of the thiazolidinedione class of drugs used to treat type 2 diabetes, activates the adipocyte-specific transcription factor peroxisome proliferator-activated receptor gamma (PPARγ). This activation causes bone loss in animals and humans, at least in part due to suppression of osteoblast differentiation from marrow mesenchymal stem cells (MSC). In order to identify mechanisms by which PPARγ2 suppresses osteoblastogenesis and promotes adipogenesis in MSC, we have analyzed the PPARγ2 transcriptome in response to Rosi. A total of 4,252 transcriptional changes resulted when Rosi (1 µM) was applied to the U-33 marrow stromal cell line stably transfected with PPARγ2 (U-33/γ2) as compared to non-induced U-33/γ2 cells. Differences between U-33/γ2 and U-33 cells stably transfected with empty vector (U-33/c) comprised 7,928 transcriptional changes, independent of Rosi. Cell type-, time- and treatment-specific gene clustering uncovered distinct patterns of PPARγ2 transcriptional control of MSC lineage commitment. The earliest changes accompanying Rosi activation of PPARγ2 included effects on Wnt, TGFβ/BMP and G-protein signaling activities, as well as sustained induction of adipocyte-specific gene expression and lipid metabolism. While suppression of osteoblast phenotype is initiated by a diminished expression of osteoblast-specific signaling pathways, induction of the adipocyte phenotype is initiated by adipocyte-specific transcriptional regulators. This indicates that distinct mechanisms govern the repression of osteogenesis and the stimulation of adipogenesis. The co-expression patterns found here indicate that PPARγ2 has a dominant role in controlling osteoblast differentiation and suggests numerous gene-gene interactions that could lead to the identification of a “master” regulatory scheme directing this process. J. Cell. Biochem. 106: 232–246, 2009. © 2008 Wiley-Liss, Inc.