We elucidated the localization of Thy-1-positive cells in the perichondrium of fetal rat limb bones to clarify the distribution of osteogenic cells in the process of endochondral ossification. We also examined the formation of calcified bone-like matrices by isolated perichondrial cells in vitro. At embryonic day (E) 15.5, when the cartilage primodia were formed, immunoreactivity for Thy-1 was detected in cells of the perichondrium adjacent to the zone of hypertrophic chondrocytes. At E17.5, when the bone collar formation and the vascular invasion were initiated, fibroblast-like cells at the sites of vascular invasion, as well as in the perichondrium, showed Thy-1 labeling. Double immunostaining for Thy-1 and osterix revealed that Thy-1 was not expressed in the osterix-positive osteoblasts. Electron microscopic analysis revealed that Thy-1-positive cells in the zone of hypertrophic chondrocytes came in contact with blood vessels. Perichondrial cells isolated from limb bones showed alkaline phosphatase activity and formed calcified bone-like matrices after 4 weeks in osteogenic medium. RT-PCR demonstrated that Thy-1 expression decreased as calcified nodules formed. Conversely, the expression of osteogenic marker genes Runx2, osterix, and osteocalcin increased. These results indicate that Thy-1 is a good marker for characterizing osteoprogenitor cells.