Long bone development involves the embryonic formation of a primary ossification center (POC) in the incipient diaphysis followed by postnatal development of a secondary ossification center (SOC) at each epiphysis. Studies have elucidated major basic mechanisms of POC development, but relatively little is known about SOC development. To gain insights into SOC formation, we used Col2-Cre Rosa-tdTomato (Col2/Tomato) reporter mice and found that their periarticular region contained numerous Tomato-positive lineage cells expressing much higher Tomato fluorescence (termed TomatoH) than underlying epiphyseal chondrocytes (termed TomatoL). With time, the TomatoH cells became evident at the SOC invagination site and cartilage canal, increased in number in the expanding SOC, and were present as mesenchymal lineage cells in the subchondral bone. These data were verified in two mouse lineage tracing models, Col2-CreER Rosa-tdTomato and Glil-CreER Rosa-tdTomato. In vitro tests showed that the periarticular TomatoH cells from Col2/Tomato mice contained mesenchymal progenitors with multidifferentiation abilities. During canal initiation, the cells expressed vascular endothelial growth factor (VEGF) and migrated into epiphyseal cartilage ahead of individual or clusters of endothelial cells, suggesting a unique role in promoting vasculogenesis. Later during SOC expansion, chondrocytes in epiphyseal cartilage expressed VEGF, and angiogenic blood vessels preceded TomatoH cells. Gene expression analyses of microdissected samples revealed upregulation of MMPs in periarticular cells at the invagination site and suggested potential roles for novel kinase and growth factor signaling pathways in regulating SOC canal initiation. In summary, our data indicate that the periarticular region surrounding epiphyseal cartilage contains mesenchymal progenitors that initiate SOC development and forms subchondral bone.