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The cell of origin for most mesenchymal tumors is unclear. One cell type that contributes to this lineages is the pericyte, a cell expressing Ng2/Cspg4. Using lineage tracing, we demonstrated that bone and soft tissue sarcomas driven by the deletion of the Trp53 tumor suppressor, or desmoid tumors driven by a mutation in Apc, can derive from cells expressing Ng2/Cspg4. Deletion of the Trp53 tumor suppressor gene in these cells resulted in the bone and soft tissue sarcomas that closely resemble human sarcomas, while stabilizing β-catenin in this same cell type caused desmoid tumors. Comparing expression between Ng2/Cspg4-expressing pericytes lacking Trp53 and sarcomas that arose from deletion of Trp53 showed inhibition of β-catenin signaling in the sarcomas. Activation of β-catenin inhibited the formation and growth of sarcomas. Thus, pericytes can be a cell of origin for mesenchymal tumors, and β-catenin dysregulation plays an important role in the neoplastic phenotype.