Bone marrow adipose tissue (BMAT) increases with aging and once disregarded as a passive marrow space filler. However, accumulating evidence suggests that BMAT is an active modulator of bone, hematopoiesis, and metabolism. Characterization of BMAT in molecular and cellular levels identified that it is distinct from white or brown adipose tissue. This review summarizes current knowledge on changes of BMAT under physiological and pathophysiological conditions of bone and marrow. Expansion of BMAT is closely linked with increased fracture risk, therefore regulation of BMAT can be considered as a novel therapeutic approach to enhance bone strength. Regarding hematopoiesis, increase in BMAT is negatively associated with the marrow function, but it is indispensable for maintaining myelopoiesis in acute myeloid leukemia. In addition, BMAT expansion is paradoxically identified in obesity as well as anorexia nervosa. It is considered that BMAT performs a different function in different nutritional states. Future studies would involve more detailed research about regulatory factors of BMAT and its functions in health and diseases. Enhancing our understanding about BMAT would open a new avenue for combating BMAT-related diseases.