Pluripotent mesenchymal stem cells (MSCs) are bone marrow stromal progenitor cells that can differentiate into osteogenic, chondrogenic, adipogenic, and myogenic lineages. Several signaling pathways have been shown to regulate the lineage commitment and terminal differentiation of MSCs. Here, we conducted a comprehensive analysis of the 14 types of bone morphogenetic protein (BMPs) for their abilities to regulate multilineage specific differentiation of MSCs. We found that most BMPs exhibited distinct abilities to regulate the expression of Runx2, Sox9, MyoD, and PPARγ2. Further analysis indicated that BMP-2, BMP-4, BMP-6, BMP-7, and BMP-9 effectively induced both adipogenic and osteogenic differentiation in vitro and in vivo. BMP-induced commitment to osteogenic or adipogenic lineage was shown to be mutually exclusive. Overexpression of Runx2 enhanced BMP-induced osteogenic differentiation, whereas knockdown of Runx2 expression diminished BMP-induced bone formation with a decrease in adipocyte accumulation in vivo. Interestingly, overexpression of PPARγ2 not only promoted adipogenic differentiation, but also enhanced osteogenic differentiation upon BMP-2, BMP-6, and BMP-9 stimulation. Conversely, MSCs with PPARγ2 knockdown or mouse embryonic fibroblasts derived from PPARγ2^−/− mice exhibited a marked decrease in adipogenic differentiation, coupled with reduced osteogenic differentiation and diminished mineralization upon BMP-9 stimulation, suggesting that PPARγ2 may play a role in BMP-induced osteogenic and adipogenic differentiation. Thus, it is important to understand the molecular mechanism behind BMP-regulated lineage divergence during MSC differentiation, as this knowledge could help us to understand the pathogenesis of skeletal diseases and may lead to the development of strategies for regenerative medicine.