Human bone marrow mesenchymal stem cells (MSC) are pleiotropic cells that differentiate to either adipocytes or osteoblasts as a result of cross-talk by specific signaling pathways including heme oxygenase (HO)-1/-2 expression. We examined the effect of inducers of HO-1 expression and inhibitors of HO activity on MSC differentiation to the osteoblast and adipocyte lineage. HO-1 expression is increased during osteoblast stem cell development but remains elevated at 25 days. The increase in HO-1 levels precedes an increase in alkaline phosphatase (AP) activity and an increase in BMP, osteonectin and RUNX-2 mRNA. Induction of HO-1 by osteogenic growth peptide (OGP) was associated with an increase in BMP-2 and osteonectin. Exposure of MSC to high glucose levels decreased osteocalcin and osteogenic protein expression, which was reversed by upregulation of the OGP-mediated increase in HO-1 expression. The glucose-mediated decrease in HO-1 resulted in decreased levels of pAMPK, pAKT and the eNOS signaling pathway and was reversed by OGP. In contrast, MSC-derived adipocytes were increased by glucose. HO-1 siRNA decreased HO-1 expression but increased adipocyte stem cell differentiation and the adipogenesis marker, PPARgamma. Thus, upregulation of HO-1 expression shifts the balance of MSC differentiation in favor of the osteoblast lineage. In contrast, a decrease in HO-1 or exposure to glucose drives the MSC towards adipogenesis. Thus, targeting HO-1 expression is a portal to increased osteoblast stem cell differentiation and to the attenuation of osteoporosis by the promotion of bone formation.