Bone-derived mesenchymal stromal cells (MSCs) differentiate into multiple lineages including chondro- and osteogenic fates and function in establishing the hematopoietic compartment of the bone marrow. Here, we analyze the emergence of different MSC types during mouse limb and long bone development. In particular, PDGFRαposSCA-1pos (PαS) cells and mouse skeletal stem cells (mSSCs) are detected within the PDGFRαposCD51pos (PαCD51) mesenchymal progenitors, which are the most abundant progenitors in early limb buds and developing long bones until birth. Long-bone-derived PαS cells and mSSCs are most prevalent in newborn mice, and molecular analysis shows that they constitute distinct progenitor populations from the earliest stages onward. Differential expression of CD90 and CD73 identifies four PαS subpopulations that display distinct chondro- and osteogenic differentiation potentials. Finally, we show that cartilage constructs generated from CD90pos PαS cells are remodeled into bone organoids encompassing functional endothelial and hematopoietic compartments, which makes these cells suited for bone tissue engineering.