Marrow cavities in all the bones of newborn mammals contain active hematopoietic tissue, known as red bone marrow. From the early postnatal period onwards, the hematopoietic tissue, mainly in the bones of the extremities, is gradually replaced by non-hematopoietic mesenchymal cells that accumulate lipid drops, known as yellow or fatty bone marrow. For its maintenance, hematopoietic tissue depends on the support of special mesenchymal cells in the bone marrow cavity, known as hematopoietic microenvironment. Both bone-forming cells and hematopoietic microenvironment cells have common progenitors - mesenchymal stem cells (MSCs). We hypothesize that: (1) Hematopoietic microenvironment cells advance along a three stage differentiation/maturation pathway. In the first stage, they support hematopoiesis and contain no fat. In the second stage, cells accumulate fat and no longer support steady state hematopoiesis; however, under conditions of increased hematopoietic requirement, they lose fat and regain their ability to support hematopoiesis. In the last stage, hematopoietic microenvironment cells retain the appearance of yellow bone marrow and do not support hematopoiesis regardless of the state of hematopoietic requirement.(2) Since MSCs are bound to endosteal and trabecular surfaces, in tubular bones their number is relatively small, compared to cancellous bones that have much larger areas of internal bone surface. MSCs are exposed to proliferative and differentiative pressures, leading to gradual reduction of their number. Consequently, the MSC population in tubular bones becomes exhausted rather early, and the post-maturation compartment of mesenchymal cells finally consists of unipotential bone precursors maintaining bone tissue and hematopoietic microenvironment advancing towards the last (fatty) stage of differentiation. In contrast, in cancellous bones the relatively large number of MSCs does not suffer exhaustion and continues to provide newly differentiated hematopoietic microenvironment, thus maintaining red bone marrow throughout the organism's life.(3) Osteogenic and hematopoietic microenvironment differentiation pathways compete with each other for their common precursor. During the organism's growth period osteogenic stimuli prevail, while in the post-maturation period, MSC differentiation into hematopoietic microenvironment increases at the expense of differentiation into bone. This results in the reduction of bone volume and expansion of marrow cavities in hematopoietically active cancellous bones, but not in tubular bones already depleted of MSCs and not participating in hematopoiesis. Experimental and clinical data supporting these hypotheses are discussed.