Bone marrow mesenchymal lineage cells are a heterogeneous cell population involved in bone homeostasis and diseases such as osteoporosis. While it is long postulated that they originate from mesenchymal stem cells (MSCs), the true identity of MSCs and their in vivo bifurcated differentiation routes into osteoblasts and adipocytes remain poorly understood. Here, by employing single cell transcriptome analysis, we identified MSCs and delineated their bilineage differentiation paths in young, adult and aging mice. Among several newly discovered mesenchymal subpopulations, one is a distinct population of adipose-lineage cells that we named marrow environment regulating adipose cells (MERAs). MERAs are non-proliferative, postprogenitor cells that express many mature adipocyte markers but are devoid of lipid droplets. They are abundant in the bone marrow of young mice, acting as pericytes and stromal cells that form numerous connections among themselves and with other cells inside bone, including endothelial cells. Genetic ablation of MERAs disrupts marrow vessel structure, promotes de novo bone formation. Taken together, MERAs represent a unique population of adipose lineage cells that exist only in the bone marrow with critical roles in regulating bone and vessel homeostasis.