Obesity is a major risk factor for some metabolic disorders including type 2 diabetes. Enhancement of peroxisome proliferator-activated receptor (PPAR) γ, a master regulator of adipocyte differentiation, is known to increase insulin-sensitive small adipocytes. In contrast, decreased PPARγ activity is also reported to improve insulin resistance. We have previously identified erucic acid as a novel natural component suppressing PPARγ transcriptional activity. In this study, we investigated the effect of erucic acid-rich yellow mustard oil (YMO) on obese/diabetic KK-Ay mice. An in vitro luciferase reporter assay and mesenchymal stem cell (MSC) differentiation assay revealed that 25 µg/mL YMO significantly inhibited PPARγ transcriptional activity and differentiation of MSCs into adipocytes but promoted their differentiation into osteoblasts. In KK-Ay mice, dietary intake of 7.0% (w/w) YMO significantly decreased the surrogate indexes for insulin resistance and the infiltration of macrophages into adipose tissue. Furthermore, 7.0% YMO increased bone mineral density. These results suggest that YMO can ameliorate obesity-induced metabolic disorders.