Adipocytes and osteoblasts are derived from a common precursor cell. It has been proposed that the bone loss commonly seen during aging or in the pathology of osteoporosis might be partly caused by a deregulation of the normal balance between osteoblast and adipocyte differentiation. In vitro differentiation of mouse embryonic stem cells toward the adipogenic and the osteogenic lineages provides a powerful system for testing effects of compounds on the developmental switch between adipogenesis and osteogenesis and identification of pharmacological targets. In this chapter, an improved protocol to commit mouse embryonic stem cells into both lineages at a correct rate is detailed.