In this report, the authors review the human skeleton and the increasing burden of bone deficiencies, the limitations encountered with the current treatments and the opportunities provided by the emerging field of cell-based bone engineering. Special emphasis is placed on different sources of human progenitor cells, as well as their pros and cons in relation to their utilization for the large-scale construction of functional bone-engineered substitutes for clinical applications. It is concluded that, human pluripotent stem cells represent a valuable source for the derivation of progenitor cells, which combine the advantages of both embryonic and adult stem cells, and indeed display high potential for the construction of functional substitutes for bone replacement therapies.