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Diabetes affects select organs such as the eyes, kidney, heart, and brain. Our recent studies show that diabetes also enhances adipogenesis in the bone marrow and reduces the number of marrow-resident vascular regenerative stem cells. In the current study, we have performed a detailed spatio-temporal examination to identify the early changes that are induced by diabetes in the bone marrow. Here we show that short-term diabetes causes structural and molecular changes in the marrow, including enhanced adipogenesis in tibiae of mice, prior to stem cell depletion. This enhanced adipogenesis was associated with suppressed transforming growth factor-beta (TGFB) signaling. Using human bone marrow-derived mesenchymal progenitor cells, we show that TGFB pathway suppresses adipogenic differentiation through TGFB-activated kinase 1 (TAK1). These findings may inform the development of novel therapeutic targets for patients with diabetes to restore regenerative stem cell function. Short-term diabetes in mice suppresses transforming growth factor-beta (TGFB) signalling to enhance adipogenesis in the tibiae marrow mesenchymal progenitor cells. Inhibition of adipogenic differentiation by TGFB is mediated through TAK1. [ABSTRACT FROM AUTHOR]