Normal periosteum is an osteoprogenitor cell-containing bone envelope, which can be activated to proliferate by trauma, retroviruses, tumors, and lymphocyte mitogens. Activated periosteum produces cartilage and bone, and is colonized by bone-resorbing cells. The osteogenic activity of periosteum is maintained in heterotopic sites and in vitro. Ectopic bone, however, is colonized by bone marrow precursor cells but does not develop a true periosteum. The absence of true periosteal envelope in the heterotopically induced bone may be the major, if not the only, difference between heterotopic and orthotopic bone deposits.