Microenvironment cues received by haematopoietic stem cells (HSC) are important in regulating the choice between self-renewal and differentiation. On the basis of the differential expression of cell-surface markers, here we identify a mesenchymal stromal progenitor hierarchy, where CD45-Ter119-CD31-CD166-CD146-Sca1+(Sca1+) progenitors give rise to CD45-Ter119-CD31-CD166-CD146+(CD146+) intermediate and CD45-Ter119-CD31-CD166+CD146-(CD166+) mature osteo-progenitors. All three progenitors preserve HSC long-term multi-lineage reconstitution capability in vitro; however, their in vivo fates are different. Post-transplantation, CD146+ and CD166+ progenitors form bone only. While Sca1+ progenitors produce CD146+, CD166+ progenitors, osteocytes and CXCL12-producing stromal cells. Only Sca1+ progenitors are capable of homing back to the marrow post-intravenous infusion. Ablation of Sca1+ progenitors results in a decrease of all three progenitor populations as well as haematopoietic stem/progenitor cells. Moreover, suppressing production of KIT-ligand in Sca1+ progenitors inhibits their ability to support HSCs. Our results indicate that Sca1+ progenitors, through the generation of both osteogenic and stromal cells, provide a supportive environment for hematopoiesis.