Bone undergoes continuous remodeling of osteoblastic bone formation and osteoclastic bone resorption to maintain proper bone mass. It is also reported that bone marrow adiposity has a reciprocal role in osteoblasts due to their same origin from mesenchymal stem cells. In addition, one of the key mediators of adipogenesis, peroxisome-proliferator activated receptor-γ (PPARγ), plays a significant role in osteoblastogenesis in bone marrow mesenchymal stem cells. One dietary component that is known to have significant impact on adiposity and bone mass is conjugated linoleic acid (CLA). However, the link between controlling adiposity to improving bone mass by CLA has not been studied intensively. Thus the purpose of this study is to determine the role of CLA on bone marrow adiposity and bone formation using murine mesenchymal stem cells. The results confirmed that the trans-10,cis-12 CLA, but not the cis-9,trans-11 CLA isomer, significantly inhibited adipogenesis and promoted osteoblastogenesis from mesenchymal stem cells. The inhibition of adipogenesis by the trans-10,cis-12 CLA was mediated by PPARγ, however, the trans-10,cis-12 CLA had direct effect on osteoblastogenesis which was independent to PPARγ in this model. The trans-10,cis-12 CLA also had significant effects on osteoclastogenesis inhibitory factor (OCIF), which suggests potential influence of CLA on osteoclastogenesis. Overall the results suggest that the trans-10,cis-12, but not the cis-9,trans-11 CLA isomer, has positive impact on bone health by both PPARγ mediated and independent mechanisms in mesenchymal stem cells.