ABSTRACT Bone marrow mesenchymal progenitor cells are precursors for various cell types including osteoblasts, adipocytes, and chondrocytes. The external environment and signals act to direct the pathway of differentiation. Importantly, situations such as aging and chronic kidney disease display alterations in the balance of osteoblast and adipocyte differentiation, adversely affecting bone integrity. Iron deficiency, which can often occur during aging and chronic kidney disease, is associated with reduced bone density. The purpose of this study was to assess the effects of iron deficiency on the capacity of progenitor cell differentiation pathways. Mouse and human progenitor cells, differentiated under standard osteoblast and adipocyte protocols in the presence of the iron chelator deferoxamine (DFO), were used. Under osteogenic conditions, 5μM DFO significantly impaired expression of critical osteoblast genes, including osteocalcin, type 1 collagen, and dentin matrix protein 1. This led to a reduction in alkaline phosphatase activity and impaired mineralization. Despite prolonged exposure to chronic iron deficiency, cells retained viability as well as normal hypoxic responses with significant increases in transferrin receptor and protein accumulation of hypoxia inducible factor 1α. Similar concentrations of DFO were used when cells were maintained in adipogenic conditions. In contrast to osteoblast differentiation, DFO modestly suppressed adipocyte gene expression of peroxisome‐proliferating activated receptor gamma, lipoprotein lipase, and adiponectin at earlier time points with normalization at later stages. Lipid accumulation was also similar in all conditions. These data suggest the critical importance of iron in osteoblast differentiation, and as long as the external stimuli are present, iron deficiency does not impede adipogenesis. © 2021 The Authors. JBMR Plus published by Wiley Periodicals LLC on behalf of American Society for Bone and Mineral Research.