One of the key challenges in bone tissue engineering is the timely formation of blood vessels that promote the survival of the implanted cells in the construct. Fracture healing largely depends on the presence of an intact periosteum but it is still unknown whether periosteum-derived cells (PDC) are critical for bone repair only by promoting bone formation or also by inducing neo-vascularization. We first established a protocol to specifically isolate murine PDC (mPDC) from long bones of adult mice. Mesenchymal stem cells were abundantly present in this cell population as more than 50% of the mPDC expressed mesenchymal markers (CD73, CD90, CD105, Sca#8208;1) and the cells exhibited trilineage differentiation potential (chondrogenic, osteogenic, adipogenic). When transplanted on a collagen-calcium phosphate scaffold in vivo, mPDC attracted numerous blood vessels and formed mature bone which comprises a hematopoiesis-supportive stroma. We explored the pro-angiogenic properties of mPDC using in vitro culture systems and showed that mPDC promote the survival and proliferation of endothelial cells through the production of vascular endothelial growth factor. Co-implantation with endothelial cells demonstrated that mPDC can enhance vasculogenesis by adapting a pericyte-like phenotype, in addition to their ability to stimulate blood vessel ingrowth from the host. In conclusion, these findings demonstrate that periosteal cells contribute to fracture repair, not only through their strong osteogenic potential, but also their pro-angiogenic features and thus provide an ideal cell source for bone regeneration therapies.