Rosiglitazone is a well-known anti-diabetic drug that increases insulin sensitivity via peroxisome proliferator-activated receptor γ (PPARγ) activation, but unfortunately it causes bone loss in animals and humans. A previous study showed that prolyl hydroxylase domain protein (PHD) plays a role in rosiglitazone-induced adipocyte differentiation. Based on the inverse relationship between adipocyte and osteoblast differentiation, we investigated whether PHD is involved in the effects of rosiglitazone on osteoblast differentiation. Rosiglitazone inhibited osteoblast differentiation in a concentration-dependent manner, and in parallel induced three PHD isoforms (PHD1, 2, and 3). PHD inhibitors and knockdown of each isoform prevented the inhibitory effects of rosiglitazone on osteoblast differentiation and increased the expression of Runx2, a transcription factor essential for osteoblastogenesis. MG-132, a proteasomal inhibitor also prevented the rosiglitazone-induced degradation of Runx2. Furthermore, both increased PHD isoform expressions and reduced osteoblast differentiation by rosiglitazone were prevented by PPARγ antagonists, indicating these effects were mediated via PPARγ activation. In vivo oral administration of rosiglitazone to female ICR mice for 8 weeks reduced bone mineral densities and plasma alkaline phosphatase (ALP) activity, and increased PHD expression in femoral primary bone marrow cells and the ubiquitination of Runx2. Together, this suggests that the rosiglitazone-induced suppression of osteoblast differentiation is at least partly induced via PPARγ-mediated PHD induction and subsequent promotion of the ubiquitination and degradation of Runx2.