Bone marrow–derived mesenchymal stem cells (BMSCs) tend to differentiate into adipocytes rather than osteoblasts in osteoporosis and other pathological conditions. Understanding the mechanisms underlying the adipo-osteogenic imbalance greatly contributes to the ability to induce specific MSC differentiation for clinical applications. This study aimed to explore whether DEP-domain containing mTOR-interacting protein (DEPTOR) regulated MSC fate and bone–fat switch, which was indicated to be a key player in bone homeostasis. We found that DEPTOR expression decreased during the osteogenesis of BMSCs but increased during adipogenesis and the shift of cell lineage commitment of BMSCs to adipocytes in mice with osteoporosis. DEPTOR facilitated adipogenic differentiation while preventing the osteogenic differentiation of BMSCs. Deptor ablation in BMSCs alleviated bone loss and reduced marrow fat accumulation in mice with osteoporosis. Mechanistically, DEPTOR binds transcriptional coactivator with a PDZ-binding motif (TAZ) and inhibits its transactivation properties, thereby repressing the transcriptional activity of RUNX2 and elevating gene transcription by peroxisome-proliferator-activated receptor-gamma. TAZ knockdown in BMSCs abolished the beneficial role of Deptor ablation in bone–fat balance in mice. Together, our data indicate that DEPTOR is a molecular rheostat that modulates BMSC differentiation and bone–fat balance, and may represent a potential therapeutic target for age-related bone loss.