<p>Bone healing is orchestrated by multiple cell populations, including those that normally do not produce bone but acquire osteoprogenitor capabilities following injury. Muscle-resident fibroadipogenic progenitors (FAPs) and superficial periosteal cells are among such cells, however their physiologic significance in bone healing and the mechanisms regulating their differentiation are unclear. Here, using the new tamoxifen-inducible <i>Clec3b.CreERT2</i> allele, we show that both of these populations can be traced and manipulated in a mouse model. Clec3b⁺ cells are completely absent in marrow and bone-lining surfaces and can differentiate to multiple cell types including osteoblasts during fracture repair and BMP2-induced heterotopic ossification. Orthotopic transplantation assays indicate that Clec3b⁺ FAPs rather than Clec3b⁺ periosteal cells are mobilized to become osteoblasts in these conditions. Further, Clec3b⁺ cells appear functionally distinct from periosteal skeletal progenitors as they exhibit remarkably low chondrogenesis during fracture healing; however, they can form cartilage during heterotopic ossification of muscle and ex vivo culture. Inhibition of WNT-signaling or depletion of Clec3b⁺ cells reduce mineralization during both processes. These data show that extra-skeletal cells that normally do not produce bone, FAPs in particular, are recruited to help repair bone fractures, and could represent a novel target for therapies aimed to enhance fracture healing.</p>