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‐imidazo4,5‐bpyridine (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.