The vertebrate neural crest is a multipotent cell population that gives rise to a variety of different cell types. We have discovered that postmigratory cranial neural crest cells (CNCCs) maintain mesenchymal stem cell characteristics and show potential utility for the regeneration of craniofacial structures. We are able to induce the osteogenic differentiation of postmigratory CNCCs, and this differentiation is regulated by bone morphogenetic protein (BMP) and transforming growth factor-β signaling pathways. After transplantation into a host animal, postmigratory CNCCs form bone matrix. CNCC-formed bones are distinct from bones regenerated by bone marrow mesenchymal stem cells. In addition, CNCCs support tooth germ survival via BMP signaling in our CNCC-tooth germ cotransplantation system. Thus, we conclude that postmigratory CNCCs preserve stem cell features, contribute to craniofacial bone formation, and play a fundamental role in supporting tooth organ development. These findings reveal a novel function for postmigratory CNCCs in organ development, and demonstrate the utility of these CNCCs in regenerating craniofacial structures.