Pkd1 localizes to primary cilia in osteoblasts and osteocytes. Targeted deletion of Pkd1 in osteoblasts results in osteopenia and abnormalities in Runx2-mediated osteoblast development. Kif3a, an intraflagellar transport protein required for cilia function, is also expressed in osteoblasts. To assess the relationship between Pkd1 and primary cilia function on bone development, we crossed heterozygous Pkd1- and Kif3a-deficient mice to create compound Pkd1 and Kif3a-deficient mice. Pkd1 haploinsufficiency (Pkd1^+/Δ) resulted in osteopenia, characterized by decreased bone mineral density, trabecular bone volume, and cortical thickness. In addition, deficiency of Pkd1 resulted in impaired osteoblastic differentiation and enhanced adipogenesis in both primary osteoblasts and/or bone marrow stromal cell cultures. These changes were associated with decreased Runx2 expression, increased PPARγ expression, and impaired hedgehog signaling as evidenced by decreased Gli2 expression in bone and osteoblast cultures. In contrast, heterozygous Kif3a^+/Δ mice display no abnormalities in skeletal development or osteoblast function, but exhibited decreased adipogenic markers in bone and impaired adipogenesis in vitro in association with decreased PPARγ expression and upregulation of Gli2. Superimposed Kif3a deficiency onto Pkd1^+/Δ mice paradoxically corrected the effects of Pkd1 deficiency on bone mass, osteoblastic differentiation, and adipogenesis. In addition, Runx2, PPARγ and Gli2 expression in bone and osteoblasts were normalized in compound double Pkd1^+/Δ and Kif3a^+/Δ heterozygous mice. The administration of sonic hedgehog, overexpression of Gli2, and the PC1 C-tail construct all increased Gli2 and Runx2-II expression, but decreased PPARγ2 gene expression in C3H10T1/2 cells. Our findings suggest a role for Pkd1 and Kif3a to counterbalance the regulation of osteogenesis and adipogenesis through differential regulation of Runx2 and PPARγ by Gli2.