Abstract The bone marrow in mammals house both hematopoietic and mesenchymal cells that are responsible for sustaining blood and bone cell production, respectively, throughout adult life. Although the hematopoietic system is well understood, the molecular identities, hierarchy of the marrow mesenchymal cells and their respective contribution to bone homeostasis are just beginning to be unraveled. Elucidation of the organization and functions of the bone marrow mesenchymal cells is fundamental to understanding the pathogenesis of both myeloid and bone diseases. By employing single-cell RNA sequencing (scRNA-seq) technology, we have discovered a subset of bone marrow mesenchymal cells co-expressing adiponectin (Adipoq) and osterix (Osx) which are traditionally considered adipocyte or osteoblast markers, respectively. Trajectory analyses predict the Adipoq+Osx+ bi-marker cells to be common progenitors for osteoblasts and marrow adipogenic lineage cells. Lineage tracing with Osx-CreERT2 or Adipoq-CreERT2 supports that the bi-marker cells give rise to both osteoblasts and adipocytes in vivo. Imaging studies localize the bi-marker cells to the endosteal bone niche. The data therefore support the hypothesis that Adipoq+Osx+ bi-marker cells are adipo-osteoprogenitors attuned to the physiological milieu in the bone marrow. To test the hypothesis, we will first determine the number and fate of the bi-marker cells in young, mature and aged mice to uncover potential age-dependent changes (aim 1). We will then investigate the functional contribution of the bi-marker progenitors to bone formation both under basal conditions and in response to the main bone anabolic drug teriparatide in mature adult mice (aim2). We will finally examine the effect of diabetes on the fate of the bi-marker cells in an experimentally induced type II diabetes mouse model. The studies are expected to shed light on the role of the adipo- osteoprogenitors in bone physiology and pathophysiology.