Bone morphogenetic protein 2 (BMP2) promotes the differentiation of undifferentiated mesenchymal cells into adipocytes. To investigate the molecular mechanisms that regulate this differentiation process, we studied the relationship between BMP2 signaling and peroxisome proliferator-activating receptor gamma (PPARgamma) during adipogenesis of mesenchymal cells by using pluripotent mesenchymal cell line C3H10T1/2. In C3H10T1/2 cells, BMP2 induced expression of PPARgamma along with adipogenesis. Overexpression of Smad6, a natural antagonist for Smad1, blocked PPARgamma expression and adipocytic differentiation induced by BMP2. Overexpression of dominant-negative PPARgamma also diminished adipocytic differentiation of C3H10T1/2 cells, suggesting the central role of PPARgamma in BMP2-induced adipocytic differentiation. Specific inhibitors for p38 kinase inhibited BMP2-induced adipocytic differentiation and transcriptional activation of PPARgamma, whereas overexpression of Smad6 had no effect on transcriptional activity of PPARgamma. Furthermore, activation of p38 kinase by overexpression of TAK1 and TAB1, without affecting PPARgamma expression, led the up-regulation of transcriptional activity of PPARgamma. These results suggest that both Smad and p38 kinase signaling are concomitantly activated and responsible for BMP2-induced adipocytic differentiation by inducing and up-regulating PPARgamma, respectively. Thus, BMP2 controls adipocytic differentiation by using two distinct signaling pathways that play differential roles in this process in C3H10T1/2 cells.