Bone marrow mesenchymal stem cells (BMSCs) can give rise to osteocytes and adipocytes, which support the development of lymphoid and myeloid cell lineages, respectively. In eLife, Zhang et al. find that BMSC function is coordinately regulated by post-translational modification of the transcription factors RUNX2 and C/EBPβ by O-linked β-N-acetylglucosamine (O-GlcNAc). Expression of Ogt, which encodes O-GlnNAc transferase (OGT), increases as BMSCs differentiate into osteocytes. Conditional deletion of Ogt in mouse BMSCs leads to defective bone formation and a reduction in B cell lymphopoiesis; conversely, bone marrow adiposity and myelopoiesis is enhanced in these conditional OGT-deficient mice. Lymphopoiesis requires OGT-dependent O-GlcNAc modification of RUNX2, as alanine substitution at serine residues 32, 33 and 371 impairs osteogenesis. However, C/EBPβ O-GlcNAcylation inhibits BMSC differentiation to adipocytes. The authors find that RUNX2 and C/EBPβ reciprocally regulate expression of lineage-instructing cytokines interleukin-7 (IL-7) and stem cell factor (SCF), encoded by Il7 and Kitl, respectively. This study indicates that reciprocal post-translational regulation of RUNX2 and C/EBPβ function is necessary to achieve balanced lymphoid and myeloid cell output.