The tumor suppressor, p53, plays a critical role in suppressing osteosarcoma. Bone marrow stromal cells (BMSCs, also known as bone marrow-derived mesenchymal stem cells) have been suggested to give rise to osteosarcomas. However, the role of p53 in BMSCs has not been extensively explored. Here, we report that p53 regulates the lineage choice of mouse BMSCs (mBMSCs). Compared to mBMSCs with wild-type p53, mBMSCs deficient in p53 have enhanced osteogenic differentiation, but with similar adipogenic and chondrogenic differentiation. The role of p53 in inhibiting osteogenic lineage differentiation is mainly through the action of Runx2, a master transcription factor required for the osteogenic differentiation of mBMSCs. We find that p53 indirectly represses the expression of Runx2 by activating the microRNA-34 family, which suppresses the translation of Runx2. Since osteosarcoma may derive from BMSCs, we examined whether p53 has a role in the osteogenic differentiation of osteosarcoma cells and found that osteosarcoma cells with p53 deletion have higher levels of Runx2 and faster osteogenic differentiation than those with wild-type p53. A systems biology approach reveals that p53-deficient mBMSCs are more closely related to human osteosarcoma while mBMSCs with wild-type p53 are similar to normal human BMSCs. In summary, our results indicate that p53 activity can influence cell fate specification of mBMSCs, and provide molecular and cellular insights into the observation that p53 loss is associated with increased osteosarcoma incidence.