For tissue engineering applications, effective bone regeneration requires rapid neo-vascularization of implanted grafts to ensure the survival of cells in the early post-implantation phase. Incorporation of autologous endothelial progenitor cells (EPCs) for the promotion of primitive vascular network formation ex vivo has offered great promise for improved graft survival, enhanced rate of vascularization and bone regeneration in vivo. For clinical usage, identification of an optimal EPC isolation source from the patient is critical. We have, for the first time, characterized and directly compared EPCs from rabbit peripheral blood and bone marrow (PB-EPCs and BM-EPCs, respectively). PB-EPCs outperformed BM-EPCs on all measures. PB-EPCs displayed typical endothelial cell markers, such as CD31, as well as high angiogenic potential in three-dimensional extracellular matrix in vitro. Furthermore, PB-EPCs cultured simultaneously with mesenchymal stem cells, displayed significantly enhanced expression levels of key osteogenic and vascular markers, including alkaline phosphatase, bone morphogenetic protein 2, and vascular endothelial growth factor. On the contrary, putative BM-EPCs did not express CD31, and instead, expressed key smooth muscle markers. BM-EPCs further failed to display vasculogenic activity. Hence, the highly angiogenic PB-derived EPCs may serve as an ideal cell population for enhanced vascularization and success of engineered bone tissue. (C) 2012 Orthopaedic Research Society. Published by Wiley Periodicals, Inc. J Orthop Res 30:15071515, 2012