Adipose tissue contains a population of pluripotent stem cells capable of differentiating along multiple mesenchymal cell lineages. In this study the authors isolated these fat-derived stem cells successfully from Lewis rats and induced differentiation along adipogenic and osteogenic lineages in vitro and in vivo. Induction was stimulated by exposing stem cells to lineage-specific induction factors. Adipocyte-inducing media contained dexamethasone, insulin, and isobutyl-methylxanthine. Osteoblast inducing media contained dexamethasone, beta-glycerophosphate, and ascorbic acid. Undifferentiated stem cells were maintained in minimal essential media alpha and fetal bovine serum. At 10 days, cells cultured in adipogenic media differentiated into adipocytes in vitro, as evidenced by positive Oil red O staining of lipid vacuoles. At 21 days, cells cultured in osteogenic media differentiated into osteoblasts in vitro as demonstrated by Alizarin red staining of a calcified extracellular matrix and immunohistochemical staining for osteocalcin. Differentiated cells were seeded at a density of 5 x 106 cells onto 15 x 15-mm polyglycolic acid grafts and implanted subcutaneously into three groups of Lewis rats: Group I contained undifferentiated stem cell grafts, group II contained adipocyte grafts, and group III contained osteoblast grafts. At weeks 4 and 8, in vivo fat formation was demonstrated in group II rats, as confirmed by Oil red O staining. At 8 weeks, group III rats demonstrated in vivo bone formation, as confirmed by the presence of osteocalcin on immunohistochemistry and the characteristic morphology of bone on hematoxylin-eosin staining. Group I rats demonstrated no in vivo bone or fat formation at either time interval. These results demonstrate the ability to isolate pluripotent stem cells from adipose tissue, to induce their differentiation into osteoblasts and adipocytes in vitro, and to form bone and fat subsequently in vivo. This is the first published report of in vivo bone formation from fat-derived stem cells. These cells may eventually serve as a readily available source of autologous stem cells for the engineering of bone and fat.