Bone-tendon interface (BTI), also called enthesis, is composed of the bone, fibrocartilage, and tendon/ligament with gradual structural characteristics. The unique gradient structure is particularly important for mechanical stress transfer between bone and soft tissues. However, BTI injuries result in fibrous scar repairs and high incidences of re-rupture, which is attributed to the lack of local stem cells with tenogenic and osteogenic potentials. In the rat model, we identified unique stem cells from costal cartilage (CDSCs) with a high in situ regeneration potential of BTI structures. Compared to bone-marrow mesenchymal stem cells (BMSCs), CDSCs exhibit higher self-renewal capacities, better adaptability to low-oxygen and low-nutrient post-transplantation environments, as well as strong bi-potent differentiation abilities of osteogenesis and tenogenesis. After transplantation, CDSCs can survive, proliferate, and in situ gradually regenerate BTI structures. Therefore, CDSCs have a great potential for tissue engineering regeneration in BTI injuries, and have future clinical application prospects. Statement of significanceTissue engineering is a promising technique for bone-to-tendon interface (BTI) regeneration after injury, but it is still a long way from clinical application. One of the major reasons is the lack of suitable seed cells. This study found an ideal source of seed cells derived from costal cartilages (CDSCs). Compared to the traditional seed cell BMSCs, CDSCs have higher proliferation ability, strong chondrogenic and tenogenic differentiation potential, and better adaptability to low-oxygen and low nutrient conditions. CDSCs were able to survive, proliferate, and regenerate BTI structures in situ, in contrast to BMSCs. CDSCs transplantation showed strong BTI structures regeneration potential both histologically and biomechanically, making it a suitable seed cell for the tissue engineering regeneration of BTI.