Recent studies suggest that human adipose tissue contains pluripotent stem cells similar to bone marrow-derived stem cells. Taking advantage of homogeneously marked cells from green fluorescent protein (GFP) transgenic mice, we have previously demonstrated that bone marrow-derived stromal cells (BSCs) differentiate into a variety of cell lineages both in vitro and in vivo. In the present study, we extend this approach to characterize adipose tissue-derived stromal cells, sometimes called processed lipoaspirate (PLA) cells. Adipose-derived stromal cells (ASCs) were isolated from inguinal fat pads of GFP transgenic mice after extensive washing with phosphate-buffered saline and treatment with collagenase. After primary culture in a control medium (Dulbecco’s modified Eagle’s medium+10% fetal bovine serum) and expansion to two passages, the cells were incubated in either an osteogenic medium (Dulbecco’s modified Eagle’s medium+10% fetal bovine serum+dexamethasone+ascorbate-2-phosphate+β-glycerophosphate) or a chondrogenic medium (Dulbecco’s modified Eagle’s medium+1% fetal bovine serum+insulin+ascorbate-2-phosphate+transforming growth factor-β1) for 2–4 weeks to induce osteogenesis and chondrogenesis, respectively. Osteogenic differentiation was assessed by von Kossa and alkaline phosphatase staining, while chondrogenic differentiation was assessed by Alcian blue staining. Expression of osteocyte specific osteopontin, osteocalcin, and alkaline phosphatase, and chondrocyte specific aggrecan and type II/X collagen was confirmed by RT-PCR. ASCs incubated in the osteogenic medium were stained positively for von Kossa and alkaline phosphatase staining. Expression of osteocyte specific genes, except osteocalcin, was also detected. Incubation with chondrogenic medium induced Alcian blue positive cells and expression of aggrecan and type II/X collagen genes. No osteochondrogenic differentiation was observed in cells incubated in the control medium. ASCs from GFP transgenic mice have both osteogenic and chondrogenic potential in vitro. Since this cell population can be easily identified through fluorescence microscopy, it may be an ideal source of ASCs for further experiments on stem cell biology and tissue engineering.