The identity of cells that establish the hematopoietic microenvironment (HME) in human bone marrow (BM), and of clonogenic skeletal progenitors found in BM stroma, has long remained elusive. We show that MCAM/CD146-expressing, subendothelial cells in human BM stroma are capable of transferring, upon transplantation, the HME to heterotopic sites, coincident with the establishment of identical subendothelial cells within a miniature bone organ. Establishment of subendothelial stromal cells in developing heterotopic BM in vivo occurs via specific, dynamic interactions with developing sinusoids. Subendothelial stromal cells residing on the sinusoidal wall are major producers of Angiopoietin-1 (a pivotal molecule of the HSC "niche" involved in vascular remodeling). Our data reveal the functional relationships between establishment of the HME in vivo, establishment of skeletal progenitors in BM sinusoids, and angiogenesis.