Synovial chondromatosis (SC) is a disorder of the synovium characterized by the formation of osteochondral nodules within the synovium. This study aimed to identify the abnormally differentiated progenitor cells and possible pathogenic signaling pathways. Loose bodies and synovium were obtained from patients with SC during knee arthroplasty. Single-cell RNA sequencing was used to identify cell subsets and their gene signatures in SC synovium. Cells derived from osteoarthritis (OA) synovium were used as controls. Multi-differentiation and colony-forming assays were used to identify progenitor cells. The roles of transcription factors and signaling pathways were investigated through computational analysis and experimental verification. We identified an increased proportion of CD34+ sublining fibroblasts in SC synovium. CD34+CD31- cells and CD34-CD31- cells were sorted from SC synovium. Compared with CD34- cells, CD34+ cells had larger alkaline phosphatase (ALP)-stained area and calcified area after osteogenic induction. In addition, CD34+ cells exhibited a stronger tube formation ability than CD34- cells. Our bioinformatic analysis suggested the expression of TWIST1, a negative regulator of osteogenesis, in CD34- sublining fibroblasts and was regulated by the TGF-β signaling pathway. The experiment showed that CD34+ cells acquired the TWIST1 expression during culture and the combination of TGF-β1 and harmine, an inhibitor of Twist1, could further stimulate the osteogenesis of CD34+ cells. Overall, CD34+ synovial fibroblasts in SC synovium have multiple differentiation potentials, especially osteogenic differentiation potential, and might be responsible for the pathogenesis of SC.