We investigated the ability of fetal mesenchymal stem cells (fMSCs) to differentiate into brown and white adipocytes and compared the expression of a number of marker genes and key regulatory factors. We showed that the expression of key adipocyte regulators and markers during differentiation is similar to that in other human and murine adipocyte models, including induction of PPARgamma2 and FABP4. Notably, we found that the preadipocyte marker, Pref-1, is induced early in differentiation and then declines markedly as the process continues, suggesting that fMSCs first acquire preadipocyte characteristics as they commit to the adipogenic lineage, prior to their differentiation into mature adipocytes. After adipogenic induction, some stem cell isolates differentiated into cells resembling brown adipocytes and others into white adipocytes. Detailed investigation of one isolate showed that the novel brown fat-determining factor PRDM16 is expressed both before and after differentiation. Importantly, these cells exhibited elevated basal UCP-1 expression, which was dependent on the activity of the orphan nuclear receptor ERRalpha, highlighting a novel role for ERRalpha in human brown fat. Thus fMSCs represent a useful in vitro model for human adipogenesis, and provide opportunities to study the stages prior to commitment to the adipocyte lineage. They also offer invaluable insights into the characteristics of human brown fat.