Bone is a complex endocrine organ that facilitates structural support, protection to vital organs, sites for hematopoiesis, and calcium homeostasis. The bone marrow microenvironment is a heterogeneous niche consisting of multipotent musculoskeletal and hematopoietic progenitors and their derivative terminal cell types. Amongst these progenitors, bone marrow mesenchymal stem/stromal cells (BMSCs) may differentiate into osteogenic, adipogenic, myogenic, and chondrogenic lineages to support musculoskeletal development as well as tissue homeostasis, regeneration and repair during adulthood. With age, the commitment of BMSCs to osteogenesis slows, bone formation decreases, fracture risk rises, and marrow adiposity increases. An unresolved question is whether osteogenesis and adipogenesis are co-regulated in the bone marrow. Osteogenesis and adipogenesis are controlled by specific signaling mechanisms, circulating cytokines, and transcription factors such as Runx2 and Pparγ, respectively. One hypothesis is that adipogenesis is the default pathway if osteogenic stimuli are absent. However, recent work revealed that Runx2 and Osx1-expressing preosteoblasts form lipid droplets under pathological and aging conditions. Histone deacetylase 3 (Hdac3) and other epigenetic regulators suppress lipid storage in preosteoblasts and/or control marrow adiposity. Establishing a better understanding of fat storage in bone marrow cells, as well as the osteoblast-adipocyte relationship within the bone marrow niche is necessary to understand the mechanisms underlying disease- and aging-related marrow fat storage and may lead to the development of new therapeutic targets for "fatty bone" and osteoporosis.