Background: BMP9 induces both osteogenic and adipogenic differentiation of mesenchymal stem cells (MSCs). Nell1 is a secretory glycoprotein with osteoinductive and anti-adipogenic activities. We investigated the role of Nell1 in BMP9-induced osteogenesis and adipogenesis in MSCs. Methods: Previously characterized MSCs iMEFs were used. Overexpression of BMP9 and NELL1 or silencing of mouse Nell1 was mediated by adenoviral vectors. Early and late osteogenic and adipogenic markers were assessed by staining techniques and qPCR analysis. In vivo activity was assessed in an ectopic bone formation model of athymic mice. Results: We demonstrate that Nell1 expression was up-regulated by BMP9. Exogenous Nell1 potentiated BMP9-induced late stage osteogenic differentiation while inhibiting the early osteogenic marker. Forced Nell1 expression enhanced BMP9-induced osteogenic regulators/markers and inhibited BMP9-upregulated expression of adipogenic regulators/markers in MSCs. In vivo ectopic bone formation assay showed that exogenous Nell1 expression enhanced mineralization and maturity of BMP9-induced bone formation, while inhibiting BMP9-induced adipogenesis. Conversely, silencing Nell1 expression in BMP9-stimulated MSCs led to forming immature chondroid-like matrix. Conclusion: Our findings indicate that Nell1 can be up-regulated by BMP9, which in turn accelerates and augments BMP9-induced osteogenesis. Exogenous Nell1 may be exploited to enhance BMP9-induced bone formation while overcoming BMP9-induced adipogenesis in regenerative medicine.