FGF23 is a bone-derived hormone that regulates mineral metabolism by inhibiting renal tubular phosphate reabsorption and suppressing circulating 1,25(OH)2D and PTH levels. These effects are mediated by FGF-receptor binding and activation in the presence of its coreceptor Klotho, which is expressed in the distal tubules of the kidney. Recently, expression of Klotho in skeletal tissues has been reported, indicating a direct, yet unclear, extrarenal effect of FGF23 on cells involved with bone development and remodeling. In the present study, we found that bone marrow stromal cells harvested from Klotho null mice developed fewer osteoblastic but more adipocytic colonies than cells from wild-type mice. The underlying mechanism was explored by experiments on mouse C3H10T1/2 cells. We found that Klotho was weakly expressed and that FGF23 dose-dependently affected the lineage fate determination. The effects of FGF23 on cell differentiation can be diminished by SU 5402, a specific tyrosine kinase inhibitor for FGF receptors. Our results indicate that FGF23 directly affects the differentiation of bone marrow stromal cells.