The characterization of mesenchymal progenitors is central to understanding development, postnatal pathology and evolutionary adaptability. The precise identity of the mesenchymal precursors that generate the coronal suture, an important structural boundary in mammalian skull development, remains unclear. We show in mouse that coronal suture progenitors originate from hedgehog-responsive cephalic paraxial mesoderm (Mes) cells, which migrate rapidly to a supraorbital domain and establish a unidirectional lineage boundary with neural crest (NeuC) mesenchyme. Lineage tracing reveals clonal and stereotypical expansion of supraorbital mesenchymal cells to form the coronal suture between E11.0 and E13.5. We identify engrailed 1 (En1) as a necessary regulator of cell movement and NeuC/Mes lineage boundary positioning during coronal suture formation. In addition, we provide genetic evidence that En1 functions upstream of fibroblast growth factor receptor 2 (Fgfr2) in regulating early calvarial osteogenic differentiation, and postulate that it plays an additional role in precluding premature osteogenic conversion of the sutural mesenchyme.