Bone marrow stromal stem cells differentiate into many different types of cells including osteoblasts and adipocytes. Long-term glucocorticoid treatment decreases osteoblastic activity but increases adipocytes. We investigated the mechanism of glucocorticoid-induced PPAR gamma 2 transcription. Treatment of human bone marrow stromal cells with dexamethasone induced the differentiation of these cells into adipocytes as measured by oil-red O staining, and Northern blot analysis showed that dexamethasone strongly induced PPAR gamma 2 mRNA expression in cells cultured in adipocyte induction medium. Moreover, the mRNA of C/EBP delta, an adipocyte-promoting transcription factor, was also induced by dexamethasone in the presence of induction medium. Gel mobility shift assays using purified GST-C/EBP delta fusion protein showed that C/EBP delta specifically binds to a 40-base pair DNA element from PPAR gamma 2 promoter, which was found to contain a tandem repeat of C/EBP binding sites. Transfection studies in mouse mesenchymal C3H10T1/2 cells showed that it is the tandem repeat of the C/EBP binding site in PPAR gamma 2 promoter region that regulates dexamethasone-mediated PPAR gamma 2 gene activation. We conclude that glucocorticoid-induced adipogenesis from bone marrow stromal cells is mediated through a reaction cascade in which dexamethasone transcriptionally activates C/EBP delta; C/EBP delta then binds to PPARy2 promoter and transactivates PPARy2 gene expression. This activated master regulator, in turn, initiates the adipocyte differentiation. (C) 2000 Wiley-Liss, inc.