Osteolytic lesions in multiple myeloma are caused by osteoclast-mediated bone resorption and reduced bone formation. A unique feature of myeloma is a failure of bone healing after successful treatment. We observed adipocytes on trabecular bone near the resorbed area in successfully treated patients. Normal marrow adipocytes, when cocultured with myeloma cells, were reprogrammed and produced adipokines that activate osteoclastogenesis and suppress osteoblastogenesis. These adipocytes have reduced expression of peroxisome proliferator-activated receptor γ (PPARγ) mediated by recruitment of polycomb repressive complex 2 (PRC2), which modifies PPARγ promoter methylation at trimethyl lysine-27 histone H3. We confirmed the importance of methylation in the PPARγ promoter by demonstrating that adipocyte-specific knockout of EZH2, a member of the PRC2, prevents adipocyte reprogramming and reverses bone changes in a mouse model. We validated the strong correlation between the frequency of bone lesions and the expression of EZH2 in marrow adipocytes from patients in remission. These results define a role for adipocytes in genesis of myeloma-associated bone disease and that reversal of adipocyte reprogramming has therapeutic implications.