Mutation of the RB-1 tumour suppressor occurs in one third of all human tumours and is particularly associated with retinoblastoma and osteosarcoma1. Numerous functions have been ascribed to the product of the human RB-1 gene, pRB. The best known is pRB’s ability to promote cell cycle exit through inhibition of the E2F transcription factors and the transcriptional repression of genes encoding cell cycle regulators1. In addition, pRB has been shown in vitro to regulate several transcription factors that are master differentiation inducers2. Depending on the differentiation factor and cellular context, pRB can either suppress or promote their transcriptional activity. For example, pRB binds to Runx2 and potentiates its ability to promote osteogenic differentiation program in vitro3. In contrast, pRB acts together with E2F to suppress PPARγ, the master activator of adipogenesis4,5. Since osteoblasts and adipocytes can both arise from mesenchymal stem cells, these observations suggest that pRB might play a role in the choice between these two fates. However, to date, there is no evidence for this in vivo. Here we use mouse models to address this hypothesis in the context of mesenchymal tissue development and tumorigenesis. Our data show that Rb status plays a key role in establishing fate choice between bone and brown adipose tissue in vivo.