BACKGROUND AND PURPOSE The transcriptional co-activator with PDZ-binding motif (TAZ) is characterized as a transcriptional modulator of mesenchymal stem cell differentiation into osteoblasts and adipocytes. Moreover, increased TAZ activity in the nucleus enhances osteoblast differentiation and suppresses adipocyte development by interacting with runt-related transcription factor 2 (RUNX2) and PPARγ, respectively. Therefore, it would be of interest to identify low MW compounds that modulate nuclear TAZ activity. EXPERIMENTAL APPROACH High-throughput screening was performed using a library of low MW compounds in order to identify TAZ modulators that enhance nuclear TAZ localization. The effects and molecular mechanisms of a TAZ modulator have been characterized in osteoblast and adipocyte differentiation. KEY RESULTS We identified 2-butyl-5-methyl-6-(pyridine-3-yl)-3-[2′-(1H-tetrazole-5-yl)- biphenyl-4-ylmethyl]-3H-imidazo[4,5-b]pyridine] (TM-25659) as a TAZ modulator. TM-25659 enhanced nuclear TAZ localization in a dose-dependent manner and attenuated PPARγ-mediated adipocyte differentiation by facilitating PPARγ suppression activity of TAZ. In addition, TAZ-induced RUNX2 activity activation was further increased in osteoblasts, causing increased osteoblast differentiation. Accordingly, TM-25659 suppressed bone loss in vivo and decreased weight gain in an obesity model. After oral administration, TM-25659 had a favourable pharmacokinetic profile. CONCLUSION AND IMPLICATIONS TM-25659 stimulated nuclear TAZ localization and thus caused TAZ to suppress PPARγ-dependent adipogenesis and enhance RUNX2-induced osteoblast differentiation in vitro and in vivo. Our data suggest that TM-25659 could be beneficial in the control of obesity and bone loss.