Long bone is an anatomically complicated tissue with trabecular-rich metaphyses at two ends and cortical-rich diaphysis at the center. The traditional flushing method isolates only mesenchymal progenitor cells from the central region of long bones and these cells are distant from the bone surface. We propose that mesenchymal progenitors residing in endosteal bone marrow that is close to the sites of bone formation, such as trabecular bone and endosteum, behave differently from those in the central bone marrow. In this report, we separately isolated endosteal bone marrow using a unique enzymatic digestion approach and demonstrated that it contained a much higher frequency of mesenchymal progenitors than the central bone marrow. Endosteal mesenchymal progenitors express common mesenchymal stem cell markers and are capable of multi-lineage differentiation. However, we found that mesenchymal progenitors isolated from different anatomical regions of the marrow did exhibit important functional differences. Compared with their central marrow counterparts, endosteal mesenchymal progenitors have superior proliferative ability with reduced expression of cell cycle inhibitors. They showed greater immunosuppressive activity in culture and in a mouse model of inflammatory bowel disease. Aging is a major contributing factor for trabecular bone loss. We found that old mice have a dramatically decreased number of endosteal mesenchymal progenitors compared with young mice. Parathyroid hormone (PTH) treatment potently stimulates bone formation. A single PTH injection greatly increased the number of endosteal mesenchymal progenitors, particularly those located at the metaphyseal bone, but had no effect on their central counterparts. In summary, endosteal mesenchymal progenitors are more metabolically active and relevant to physiological bone formation than central mesenchymal progenitors. Hence, they represent a biologically important target for future mesenchymal stem cell studies.