Abstract. Steroids are known to inhibit osteogenic differentiation and decrease bone formation in mesenchymal stem cells (MSCs), while concomitantly inducing steroid-induced avascular necrosis of the femoral head (SANFH). The aim of the present study was to evaluate the function of MSCs on differentiation in SANFH and investigate the pathobiological mechanisms underlying SANFH in a rabbit model. MSCs in the control, trauma-induced ANFH (TANFH) and SANFH groups were incubated with low-glucose complete Dulbecco's modified Eagle's medium containing 10% fetal bovine serum. A number of adipocytes in the MSCs were stained with Sudan III and counted using a light microscope. The mRNA and protein expression levels of the adipose-specific 422 (AP2), peroxisome proliferator-activated receptor-γ (PPARγ), RUNX2, collagen type I (Col I) and miR-103 in the MSCs were determined using quantitative polymerase chain reaction and western blot analysis, respectively. In addition, the activities of osteocalcin (OC), alkaline phosphatase (ALP) and triglyceride (TG) in MSCs were analyzed using radioimmunoassay and determination kits. In the MSCs of the SANFH group, the mRNA and protein expression levels of AP2 and PPARγ were increased, while those of RUNX2 and Col I were reduced. Furthermore, the levels of OC and ALP activity in the MSCs of the SANFH group were decreased, and the activity of TG in the MSCs of the SANFH group was increased. In addition, the expression of miR-103 in the MSCs of the SANFH group was elevated. Following routine culture of the MSCs for 3 weeks, the number of adipocytes among the MSC population of the SANFH group was increased. Therefore, the results of the present study suggest that the osteogenic differentiation of MSCs in the SANFH was mitigated, while fat differentiation was promoted, which provides a novel explanation for the pathological changes associated with SANFH.