Abstract Mesenchymal stem cells (MSCs) show promise for cellular therapy and regenerative medicine. Human adipose tissue-derived stem cells (hASCs) represent an attractive source of seed cells in bone regeneration. How to effectively improve osteogenic differentiation of hASCs in the bone tissue engineering has become a very important question with profound translational implications. Numerous regulatory pathways dominate osteogenic differentiation of hASCs involving transcriptional factors and signaling molecules. However, how these factors combine with each other to regulate hASCs osteogenic differentiation still remains to be illustrated. The highly conserved developmental proteins TWIST play key roles for transcriptional regulation in mesenchymal cell lineages. This study investigates TWIST1 function in hASCs osteogenesis. Our results show that TWIST1 shRNA silencing increased the osteogenic potential of hASCs in vitro and their skeletal regenerative ability when applied in vivo. We demonstrate that the increased osteogenic capacity observed with TWIST1 knockdown in hASCs is mediated through endogenous activation of BMP and ERK/FGF signaling leading, in turn, to upregulation of TAZ, a transcriptional modulator of MSCs differentiation along the osteoblast lineage. Inhibition either of BMP or ERK/FGF signaling suppressed TAZ upregulation and the enhanced osteogenesis in shTWIST1 hASCs. Cosilencing of both TWIST1 and TAZ abrogated the effect elicited by TWIST1 knockdown thus, identifying TAZ as a downstream mediator through which TWIST1 knockdown enhanced osteogenic differentiation in hASCs. Our functional study contributes to a better knowledge of molecular mechanisms governing the osteogenic ability of hASCs, and highlights TWIST1 as a potential target to facilitate in vivo bone healing. Stem Cells 2015;33:833–847