We generated Prx1CreER-GFP transgenic mice that express tamoxifen-inducible Cre recombinase and GFP under the control of a 2.4 kb Prx1 promoter. The transgene is expressed in osteochondro progenitor cells in the developing limb buds and in a subpopulation of periosteal cells that is closely associated with the cortical bone. GFP-expressing cells isolated from the diaphyses of long bones by cell sorting express multiple markers of periosteal cells, including Prx1, Fgf18, Tenascin-W, Periostin, and Thrombospondin 2. In addition, these cells undergo chondrogenic and osteogenic differentiation in culture upon induction. Cell fate analysis using the Rosa26 LacZ reporter indicated that transgene-expressing cells give rise to some of the chondrocytes and osteoblasts in the fracture callus. Collectively, these observations strongly suggest that the transgene-expressing cells are osteochondro progenitor cells in the periosteum. The established Prx1CreER-GFP mice would offer novel approaches for analyzing the functions of periosteal cells in vitro and in vivo.