This paper describes the effect of increased expression of HO-1 protein and increased levels of HO activity on differentiation of bone-marrow-derived human MSCs. MSCs are multipotent cells that proliferate and differentiate into many different cell types including adipocytes and osteoblasts. HO, the rate-limiting enzyme in heme catabolism, plays an important role during MSCs differentiation. HO catalyzes the stereospecific degradation of heme to biliverdin, with the concurrent release of iron and carbon monoxide. Upregulation of HO-1 expression and increased HO activity are essential for MSC growth and differentiation to the osteoblast lineage consistent with the role of HO-1 in hematopoietic stem cell differentiation. HO-1 participates in the MSC differentiation process shifting the balance of MSC differentiation in favor of the osteoblast lineage by decreasing PPARγ and increasing osteogenic markers such as alkaline phosphatase and BMP-2. In this paper, we define HO-1 as a target molecule in the modulation of adipogenesis and osteogenesis from MSCs and examine the role of the HO system in diabetes, inflammation, osteoporosis, hypertension, and other pathologies, a burgeoning area of research.