Identification of a reliable marker of skeletal precursor cells within calcified and soft tissues remains a major challenge for the field. To address this, we used a transgenic model in which osteoblasts can be eliminated by pharmacological treatment. Following osteoblast ablation a dramatic increase in a population of α-smooth muscle actin (α-SMA) positive cells was observed. During early recovery phase from ablation we have detected cells with the simultaneous expression of α-SMA and a preosteoblastic 3.6GFP marker, indicating the potential for transition of α-SMA⁺ cells towards osteoprogenitor lineage. Utilizing α-SMAGFP transgene, α-SMAGFP⁺ positive cells were detected in the microvasculature and in the osteoprogenitor population within bone marrow stromal cells. Osteogenic and adipogenic induction stimulated expression of bone and fat markers in the α-SMAGFP⁺ population derived from bone marrow or adipose tissue. In adipose tissue, α-SMA⁺ cells were localized within the smooth muscle cell layer and in pericytes. After in vitro expansion, α-SMA⁺/CD45⁻/Sca1⁺ progenitors were highly enriched. Following cell sorting and transplantation of expanded pericyte/myofibroblast populations, donor-derived differentiated osteoblasts and new bone formation was detected. Our results show that cells with a pericyte/myofibroblast phenotype have the potential to differentiate into functional osteoblasts.