While century old clinical reports document the periosteum's remarkable regenerative capacity, only in the past decade have scientists undertaken mechanistic investigations of its regenerative potential. At a Workshop at the 2012 Annual Meeting of Orthopaedic Research Society, we reviewed the molecular, cellular, and tissue scale approaches to elucidate the mechanisms underlying the periosteum's regenerative potential as well as translational therapies engineering solutions inspired by its remarkable regenerative capacity. The entire population of osteoblasts within periosteum, and at endosteal and trabecular bone surfaces within the bone marrow, derives from the embryonic perichondrium. Periosteal cells contribute more to cartilage and bone formation within the callus during fracture healing than do cells of the bone marrow or endosteum, which do not migrate out of the marrow compartment. Furthermore, a current healing paradigm regards the activation, expansion, and differentiation of periosteal stem/progenitor cells as an essential step in building a template for subsequent neovascularization, bone formation, and remodeling. The periosteum comprises a complex, composite structure, providing a niche for pluripotent cells and a repository for molecular factors that modulate cell behavior. The periosteum's advanced, smart material properties change depending on the mechanical, chemical, and biological state of the tissue. Understanding periosteum development, progenitor cell-driven initiation of periosteum's endogenous tissue building capacity, and the complex structurefunction relationships of periosteum as an advanced material are important for harnessing and engineering ersatz materials to mimic the periosteum's remarkable regenerative capacity. (c) 2012 Orthopaedic Research Society. Published by Wiley Periodicals, Inc. J Orthop Res 30:18691878, 2012