Fad104 (factor for adipocyte differentiation 104) is a novel gene expressed temporarily in the early stages of adipocyte differentiation. Previously, we showed that fad104 promotes adipocyte differentiation in mouse 31341 cells and mouse embryonic fibroblasts (MEFs). Furthermore, we reported that implanted wild-type MEFs could develop into adipocytes, whereas fad104-deficient MEFs could not. Interestingly, bone-like tissues were only observed in the implants derived from fad 104-deficient MEFs. This result implies that fad104 is involved in osteoblast differentiation. However, the functions of fad104 during osteogenesis are unknown. In this paper, we show that fad 104 negatively regulates osteoblast differentiation. During the differentiation process, the level of fad104 expression decreased. Deletion of fad104 facilitated osteoblast differentiation in MEFs, and elevated the level of runx2, a master regulator of osteoblast differentiation. Disruption of fad104 suppressed BMP-2-mediated adipocyte differentiation in MEFs. In conclusion, we demonstrate that fad104 reciprocally regulates differentiation of adipocytes and osteoblast; functions as a positive regulator in adipocyte differentiation and as a negative regulator in osteoblast differentiation. (C) 2010 Elsevier Inc. All rights reserved.