Balance between adipocyte and osteoblast differentiation is the key link of disease progression in obesity and osteoporosis. We have previously reported that formononetin (FNT), an isoflavone extracted from Butea monosperma, stimulates osteoblast formation and protects against postmenopausal bone loss. The inverse relationship between osteoblasts and adipocytes prompted us to analyse the effect of FNT on adipogenesis and in vivo bone loss, triggered by high-fat diet (HFD)-induced obesity. The anti-obesity effect and mechanism of action of FNT was determined in 3T3-L1 cells and HFD-induced obese male mice. Our findings show that FNT suppresses the adipogenic differentiation of 3T3-L1 fibroblasts, through down-regulation of key adipogenic markers such as PPARγ, CCAAT/enhancer-binding protein alpha (C/EBPα) and sterol regulatory element-binding protein (SREBP) and inhibits intracellular TAG accumulation. Increased intracellular reactive oxygen species levels and AMP-activated protein kinase (AMPK) activation accompanied by stabilisation of β-catenin were attributed to the anti-adipogenic action of FNT. In vivo, 12 weeks of FNT treatment inhibited the development of obesity in mice by attenuating HFD-induced body weight gain and visceral fat accumulation. The anti-obesity effect of FNT results from increased energy expenditure. FNT also protects against HFD-induced dyslipidaemia and rescues deterioration of trabecular bone volume by increasing bone formation and decreasing bone resorbtion caused by HFD. FNT’s rescuing action against obesity-induced osteoporosis commenced at the level of progenitors, as bone marrow progenitor cells, obtained from the HFD mice group supplemented with FNT, showed increased osteogenic and decreased adipogenic potentials. Our findings suggest that FNT inhibits adipogenesis through AMPK/β-catenin signal transduction pathways and protects against HFD-induced obesity and bone loss.