Five to ten percent of fractures fail to heal normally leading to additional surgery, morbidity, and altered quality of life. Fracture healing involves the coordinated action of stem cells primarily coming from the periosteum which differentiate into the chondrocytes and osteoblasts, forming first the soft (cartilage) callus followed by the hard (bone) callus. These stem cells are accompanied by a vascular invasion that appears critical for the differentiation process and which may enable the entry of osteoclasts necessary for the remodeling of the callus into mature bone. However, more research is needed to clarify the signaling events that activate the osteochondroprogenitor cells of periosteum and stimulate their differentiation into chondrocytes and osteoblasts. Ultimately a thorough understanding of the mechanisms for differential regulation of these osteochondroprogenitors will aid in the treatment of bone healing and the prevention of delayed union and nonunion of fractures. In this review, evidence supporting the concept that the periosteal cells are the major cell sources of skeletal progenitors for the fracture callus will be discussed. The osteogenic differentiation of periosteal cells manipulated by Wnt/β-catenin, TGF/BMP, Ihh/PTHrP, and IGF-1/PI3K-Akt signaling in fracture repair will be examined. The effect of physical (hypoxia and hyperoxia) and chemical factors (reactive oxygen species) as well as the potential coordinated regulatory mechanisms in the periosteal progenitor cells promoting osteogenic differentiation will also be discussed. Understanding the regulation of periosteal osteochondroprogenitors during fracture healing could provide insight into possible therapeutic targets and thereby help to enhance future fracture healing and bone tissue engineering approaches. J. Cell. Physiol. 232: 913-921, 2017. © 2016 Wiley Periodicals, Inc.