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Kaposi's sarcoma (KS) is an AIDS-defining cancer caused by the KS-associated herpesvirus (KSHV). Unanswered questions regarding KS are its cellular ontology and the conditions conducive to viral oncogenesis. We identify PDGFRA(+)/SCA-1(+) bone marrow-derived mesenchymal stem cells (Pα(+)S MSCs) as KS spindle-cell progenitors and found that pro-angiogenic environmental conditions typical of KS are critical for KSHV sarcomagenesis. This is because growth in KS-like conditions generates a de-repressed KSHV epigenome allowing oncogenic KSHV gene expression in infected Pα(+)S MSCs. Furthermore, these growth conditions allow KSHV-infected Pα(+)S MSCs to overcome KSHV-driven oncogene-induced senescence and cell cycle arrest via a PDGFRA-signaling mechanism; thus identifying PDGFRA not only as a phenotypic determinant for KS-progenitors but also as a critical enabler for viral oncogenesis.