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Abstract The outer coverings of the skeleton, which is also known as the periosteum, are arranged in concentric layers and act as a reservoir for tissue-specific bone progenitors. The cellular heterogeneity within this tissue depot is being increasingly recognized. Here, inducible PDGFRα reporter animals were found to mark a population of cells within the periosteum that act as a stem cell reservoir for periosteal appositional bone formation and fracture repair. During these processes, PDGFRα reporter+ progenitors give rise to Nestin+ periosteal cells before becoming osteoblasts and osteocytes. The diphtheria toxin-mediated ablation of PDGFRα reporter+ cells led to deficits in cortical bone formation during homeostasis and a diminutive hard callus during fracture repair. After ossicle transplantation, both mouse PDGFRα reporter+ periosteal cells and human Pdgfrα+ periosteal progenitors expand, ossify, and recruit marrow to a greater extent than their counterpart periosteal cells, whereas PDGFRα reporter− periosteal cells exhibit a predisposition to chondrogenesis in vitro. Total RNA sequencing identified enrichment of the secreted factors Fermt3 and Ptpn6 within PDGFRα reporter+ periosteal cells, which partly underlie the osteoblastogenic features of this cell population.