Periosteal cells are important in embryogenesis, fracture healing, and cartilage repair and could provide cells for osteochondral tissue engineering. We determined whether a population of cells isolated from human periosteal tissue contains cells with a mesenchymal stem cell (MSC) phenotype and whether these cells can be expanded in culture and used to form tissue in vitro. We obtained periosteal tissue from six patients. Initial expression of cell surface markers was assessed using flow cytometry. Cells were cultured over 10 generations and changes in gene expression evaluated to assess phenotypic stability. Phenotype was confirmed using flow cytometry and colony-forming ability assays. Mineral formation was assessed by culturing Stro-1(-) and unsorted cells with osteogenic supplements. Three cell culture samples were used for a reverse transcription-polymerase chain reaction, four for flow cytometry, three for colony-forming assay, and three for mineralization. Primary cultures, containing large numbers of hematopoietic cells were replaced initially by Stro-1 and ALP-expressing immature osteoblastic cell types and later by ALP-expressing cells, which lacked Stro-1 and which became the predominant cell population during subculture. Approximately 10% of the total cell population continued to express markers for Stro1(+)/ALP(-) cells throughout. These data suggest periosteum contains a large number of undifferentiated cells that can differentiate into neotissue and persist despite culture in noncell-specific media for over 10 passages. Cultured periosteal cells may contribute to tissue formation and may be applicable for tissue engineering applications.