Numerous intrinsic factors regulate mesenchymal progenitor commitment to a specific cell fate, such as osteogenic or adipogenic lineages. Identification and modulation of novel intrinsic regulatory factors represent an opportunity to harness the regenerative potential of mesenchymal progenitors. In the present study, the transcription factor (TF) ZIC1 was identified to be differentially expressed among adipose compared with skeletal-derived mesenchymal progenitor cells. We observed that ZIC1 overexpression in human mesenchymal progenitors promotes osteogenesis and prevents adipogenesis. ZIC1 knockdown demonstrated the converse effects on cell differentiation. ZIC1 misexpression was associated with altered Hedgehog signaling, and the Hedgehog antagonist cyclopamine reversed the osteo/adipogenic differentiation alterations associated with ZIC1 overexpression. Finally, human mesenchymal progenitor cells with or without ZIC1 overexpression were implanted in an ossicle assay in NOD-SCID gamma mice. ZIC1 overexpression led to significantly increased ossicle formation in comparison to the control, as assessed by radiographic and histologic measures. Together, these data suggest that ZIC1 represents a TF at the center of osteo/adipogenic cell fate determinations-findings that have relevance in the fields of stem cell biology and therapeutic regenerative medicine.