Obesity, a growing pandemic, is a risk factor for many cancers and causes increased bone marrow adipose tissue (BMAT). in vitro studies and obese animal models suggest that BMAT contributes to cancer progression, but there is a lack of preclinical models to directly test BMAT's role in cancer. Overactivation of peroxisome‐proliferator‐activated receptor‐γ (PPARγ) can skew bone formation and resorption rates, resulting in increased BMAT and trabecular bone loss. Thiazolidinediones (eg, rosiglitazone) are anti‐diabetic therapies that promote adipogenesis through PPARγ activation. We investigated if rosiglitazone increases BMAT in an immunocompromised model, commonly used in cancer research, and if these effects could be reversed by co‐administering a bone anabolic agent (sclerostin‐neutralizing antibody [Scl‐Ab]), which has been shown to inhibit adipogenesis, using DXA, μCT, OsO4 μCT, and dynamic histomorphometry. Four weeks of rosiglitazone in female SCID Beige mice (cohort 1) significantly decreased trabecular bone volume (BV/TV) by about one‐half, through increased osteoclast and suppressed osteoblast activity, and significantly increased BMAT. In cohort 2, mice were administered rosiglitazone ± Scl‐Ab for 4 weeks, and then rosiglitazone was discontinued and Scl‐Ab or vehicle were continued for 6 weeks. Scl‐Ab significantly increased bone parameters (eg, BV/TV, N.Ob/B.Pm, and MS/BS) in both groups. Scl‐Ab also overcame many negative effects of rosiglitazone (eg, effects on trabecular bone parameters, increased mineralization lag time [MLT], and decreased bone formation rate [BFR]). Interestingly, Scl‐Ab significantly decreased rosiglitazone‐induced BMAT in the femur, mostly due to a reduction in adipocyte size, but had a much weaker effect on tibial BMAT. These data suggest targeting sclerostin can prevent rosiglitazone‐induced bone loss and reduce BM adiposity, in some, but not all BMAT locations. Collectively, our data demonstrate that rosiglitazone increases BMAT in SCID Beige mice, but concomitant changes in bone may confound its use to specifically determine BMAT's role in tumor models.