Osteoblasts and adipocytes are derived from mesenchymal stem cells and play important roles in skeletal homeostasis. Osteoblast differentiation results in a decrease in the cellular concentration of the isoprenoid geranylgeranyl pyrophosphate (GGPP), and the statin-mediated depletion of GGPP stimulates osteoblast differentiation. Adipogenic differentiation, in contrast, results in increased expression of GGPP synthase (GGPPS), and GGPP lowering agents inhibit adipogenesis in vitro. In this study, we tested the hypothesis that GGPP inhibits osteoblast differentiation and enhances adipogenesis. We found that treatment with exogenous GGPP reduced osteoblastic gene expression and matrix mineralization in primary calvarial osteoblast cultures. GGPP treatment of primary calvarial osteoblasts and bone marrow stromal cells (BMSCs) led to increased expression of total peroxisome proliferator activated receptor (PPAR)-γ as well as the adipocyte specific splice variant PPARγ2. Inhibition of PPARγ transcriptional activity did not prevent the effects of GGPP on osteoblasts, suggesting that enhanced PPARγ expression is secondary to the inhibition of osteoblast differentiation. Enhanced PPARγ expression correlated with the increased formation of Oil Red O-positive cells in osteoblast cultures. Additionally, primary calvarial osteoblasts treated with GGPP exhibited increased expression of the adipokine adiponectin. Consistent with a role for GGPP in adipogenesis, adipogenic differentiation of BMSCs could be impaired by specific depletion of cellular GGPP. In contrast to previous reports utilizing other cell types, treatment of osteoblasts with GGPP did not increase geranylgeranylation, suggesting that GGPP itself may be acting as a signaling molecule. GGPP treatment of MC3T3-E1 pre-osteoblasts and primary calvarial osteoblasts led to enhanced insulin-induced Erk signaling which has been previously demonstrated to inhibit insulin receptor substrate (IRS)-1 activity. Additionally, GGPP treatment of MC3T3-E1 pre-osteoblasts resulted in a decrease in the insulin-induced phosphorylation of the insulin receptor. Altogether these findings demonstrate a negative role for GGPP in osteoblast differentiation, leading to increased adipogenesis. Additionally, the effects of GGPP on insulin signaling suggest a potential mechanism for inhibition of osteoblast differentiation and also implicate a role for this isoprenoid in physiological energy homeostasis.