Leptin functions through a well-documented central neuroendocrine pathway to regulate bone mass. However, the ability of leptin to modulate bone mass through a peripheral mechanism has been debated due to conflicting in vitro results and lack of sufficient in vivo models. We utilized mice with LoxP sites introduced into the long-form leptin receptor (ObRb) gene to determine how leptin regulates mesenchymal progenitor cell (MPC) differentiation and osteoblast function in vitro and in vivo. Rapid phosphorylation of Stat3 after leptin treatment of bone marrow stromal cells (BMSCs) from mice with conditional deletion of ObRb in macrophages (LysM(Cre+F/F)) confirmed expression of functional leptin receptors by BMSCs. Adenovirus-Cre mediated disruption of ObRb in primary stromal cells decreased mineralization and increased adipogenesis. In contrast, BMSCs harvested from leptin-signaling deficient Ob/Ob or Db/Db mice showed increased mineralization. To determine the physiologic relevance of these differences, mice with cell-specific deletion of ObRb in mesenchymal precursors (3.6(Cre+F/F)) or osteoblasts (2.3(Cre+F/F)) were generated. Although the 2.3(Cre+F/F) mice were grossly normal, the 3.6(Cre+F/F) mice displayed mild obesity that was not attributed to food intake. Femurs of 3.6(Cre+F/F) animals showed a 58%-61.9% increase in trabecular bone volume and a 65.5%-74% increase in bone mineral density. Cortical volume and mineral content were also increased 18%-22%. Primary 3.6(Cre+F/F) BMSCs recapitulated the high mineralization phenotype of Ob/Ob and Db/Db BMSCs. We conclude that leptin may have multiple peripheral roles depending on the differentiation state of MPC. Leptin (a) helps maintain MPCs in an undifferentiated state and (b) promotes mineralization of more differentiated osteoblasts.