The balance between osteogenesis and adipogenesis of bone marrow stromal cells is impaired in many human diseases. Knowledge of how to fine-tune this balance is of medical importance. CCAAT/enhancer binding protein α (C/EBPα) has been shown to regulate the balance between osteogenesis and adipogenesis of C3H10T1/2 cells, with epigenetic modifications of the C/EBPα promoter playing an important role. The present study aimed to elucidate the underlying molecular mechanisms. The results showed that peroxisome proliferator-activated receptor γ (PPARγ) binds the −1286 bp/−1065 bp region of the C/EBPα promoter to activate C/EBPα expression during osteogenesis and adipogenesis of C3H10T1/2 cells. DNA hypermethylation in the −1286 bp/−1065 bp region, observed at the terminal stage of osteogenesis, prevented PPARγ binding, and then histone deacetylase 1 (HDAC1) occupied this region to reduce the level of histone acetylation. We regulated the balance between osteogenesis and adipogenesis of mouse bone marrow stromal cells through modulation of DNA methylation and histone acetylation status. In addition, in bone marrow stromal cells from the glucocorticoid-induced osteoporosis (GIO) mouse, hypomethylation of CpG sites, higher binding of PPARγ, acetylated histones 3 and 4, and reduced binding of HDAC1 in the −1286 bp/−1065 bp region of C/EBPα promoter were observed, compared with normal mice. This study provides a deeper insight into the molecular mechanisms underlying the balance between osteogenesis and adipogenesis regulated by C/EBPα in synergy with PPARγ, and suggests a molecular model for how DNA methylation and histone acetylation are linked by PPARγ to regulate differentiation of bone marrow stromal cells.