Abstract Mesenchymal stem cells (MSCs) are multipotent cells that can differentiate into mature cells of various cell types. Although the differentiation process of MSCs requires lineage-specific transcription factors, the exact molecular mechanism that determines MSCs differentiation is not clearly addressed. Here, we demonstrate a Smad4-Taz axis as a new intrinsic regulator for adipo-osteogenic differentiation of MSCs and show that this function of Smad4 is independent of the transforming growth factor-β signal. Smad4 directly bound to the Taz protein and facilitated nuclear localization of Taz through its nuclear localization signal. Nuclear retention of Taz by direct binding to Smad4 increased expression of osteogenic genes through enhancing Taz-runt-related transcription factor 2 (Runx2) interactions in the C3H10T1/2 MSC cell line and preosteoblastic MC3T3-E1 cells, whereas it suppressed expression of adipogenic genes through promoting Taz-peroxisome proliferator-activated receptor-γ (PPARγ) interaction in C3H10T1/2 and preadipogenic 3T3-L1 cells. A reciprocal role of the Smad4 in osteogenic and adipogenic differentiation was also observed in human adipose tissue-derived stem cells (hASCs). Consequently, Smad4 depletion in C3H10T1/2 and hASCs reduced nuclear retention of Taz and thus caused the decreased interaction with Runx2 or PPARγ, resulting in delayed osteogenesis or enhanced adipogenesis of the MSC. Therefore, these findings provide insight into a novel function of Smad4 to regulate the balance of MSC lineage commitment through reciprocal targeting of the Taz protein in osteogenic and adipogenic differentiation pathways. Stem Cells 2019;37:368–381