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Abstract Cranial sutures separate neighboring skull bones and are sites of bone growth. A key question is how osteogenic activity is controlled to promote bone growth while preventing aberrant bone fusions during skull expansion. Using single-cell transcriptomics, lineage tracing, and mutant analysis in zebrafish, we uncover key developmental transitions regulating bone formation at sutures during skull expansion. In particular, we identify a subpopulation of mesenchyme cells in the mid-suture region that upregulate a suite of genes including BMP antagonists (e.g. grem1a) and pro-angiogenic factors. Lineage tracing with grem1a:nlsEOS reveals that this mid-suture subpopulation is largely non-osteogenic. Moreover, combinatorial mutation of BMP antagonists enriched in this mid-suture subpopulation results in increased BMP signaling in the suture, misregulated bone formation, and abnormal suture morphology. These data reveal establishment of a non-osteogenic mesenchyme population in the mid-suture region that restricts bone formation through local BMP antagonism, thus ensuring proper suture morphology.