Introduction: Multipotent adipose-derived mesenchymal cells (AMCs) have been shown to possess the capacity to form bone both in vitro and in vivo. Studies evaluating the underlying molecular mechanisms of AMC osteogenesis have identified BMP signaling to be potentially critical. In this study, we examined the ability to enhance the bone forming ability of AMCs through a downregulation of the BMP antagonist Noggin. Methods: AMCs were harvested from transgenic mice containing a homozygous noggin allele flanked by loxP sites. Cre recombinase was delivered using an adenoviral vector to remove the noggin allele. Infection efficiency was determined by Cre recombinase-mediated activation of a GFP reporter construct and also by QRT-PCR analysis. AMCs were then cultured in osteogenic differentiation media for 7 or 21 days prior to evaluation by QRT-PCR for markers of osteogenic differentiation and also by histological staining. Comparisons were made to control AMCs cells treated with either empty adenoviral infection or sham infection. Results: FACS analysis for GFP fluorescence demonstrated an 84.4% infection efficiency. QRT-PCR analysis for noggin revealed a 97% transcript reduction relative to control AMCs (*p<0.05). Gene analysis following 7 days of differentiation revealed a significant increase in alkaline phosphatase and osteopontin transcript. Histological staining with Alizarin Red and von Kossa following 21 days of differentiation demonstrated more extracellular matrix mineralization and bone nodule deposition by AMCs with the noggin allele removed. Quantification of staining showed a statistically significant increase for AMCs treated with Cre recombinase (*p<0.05). Conclusions: Our data demonstrate that downregulation of the BMP antagonist noggin resulted in enhanced osteogenesis by AMCs. This was revealed through both increased expression of markers for osteogenic differentiation and by histological staining for terminal differentiation. Reduction in BMP antagonism may thus be an approach for studies designed to promote in vivo skeletogenesis using multipotent mesenchymal cells.