The development of cancer is due to the growth and proliferation of transformed normal cells. Recent evidence suggests that the nature of oncogenic stress and the state of the cell of origin critically affect both tumorigenic activity and tumor histological type. However, this mechanistic relationship in mesenchymal tumors is currently largely unexplored. To clarify these issues, we established a mouse osteosarcoma (OS) model through overexpression of c-MYC in bone marrow stromal cells (BMSCs) derived from Ink4a/Arf (-/-) mice. Single-cell cloning revealed that c-MYC-expressing BMSCs are composed of two distinctly different clones: highly tumorigenic cells, similar to bipotent-committed osteochondral progenitor cells, and low-tumorigenic tripotent cells, similar to mesenchymal stem cells (MSCs). It is noteworthy that both bipotent and tripotent cells were capable of generating histologically similar, lethal OS, suggesting that both committed progenitor cells and MSCs can become OS cells of origin. Shifting mesenchymal differentiation by depleting PPARγ in tripotent MSC-like cells and overexpressing PPARγ in bipotent cells affected cell proliferation and tumorigenic activity. Our findings indicate that differentiation potential has a key role in OS tumorigenic activity, and that the suppression of adipogenic ability is a critical factor for the development of OS.