Drugs used in the treatment of type 2 diabetes and cardiovascular disease, specifically peroxisome proliferator-activated receptor (PPAR) agonists, have been reported to affect bone cell function and fracture risk. In this study, we assessed the direct effects of PPAR-γ agonists (rosiglitazone and troglitazone), used in the treatment of diabetes, and a PPAR-α agonist (fenofibrate), used to treat hyperlipidaemia, on the function of primary osteoblasts and osteoclasts. Formation of ‘trabecular’ bone structures by rat calvarial osteoblasts was reduced by up to 85% in cultures treated with rosiglitazone and by 45% in troglitazone-treated or fenofibrate-treated cultures; at the same time, lipid droplet formation was increased by 40–70%. The expression of key osteogenic markers was similarly downregulated in cultures treated with PPAR agonists, whereas adipogenesis markers were upregulated. Formation of osteoclasts in cultures derived from mouse marrow diminished with fenofibrate treatment, whereas both glitazones reduced resorptive activity without affecting osteoclast number. Metformin, although not a PPAR agonist, is also commonly used in the treatment of type 2 diabetes. Here, metformin was found to have no effect on bone cell function. Taken together, these data suggest that PPAR-γ agonists may enhance bone loss via increased adipogenesis at the expense of osteoblast formation. In contrast, PPAR-α agonists may prevent bone loss. Given that the prevalence of diabetes and cardiovascular disease is expected to rise significantly, greater attention may need to be paid to the effects of PPAR agonists on bone homeostasis. Copyright © 2014 John Wiley & Sons, Ltd.