Light and electron microscopic studies of early changes in the medullary callus of a fracture of the rib in rabbits revealed the loss of normal architecture of the marrow and the disappearance of blood vessels in the region of high cellular density adjacent to the fibrin clot; the enlargement and transformation of capillary and venous endothelial cells in the region of low cellular density adjacent to the normal, uninjured marrow; the appearance of polymorphic mesenchymal cells throughout the medullary callus; and the appearance of osteoblasts and new-bone formation by twenty-four hours after the fracture. The meaning of these morphological changes is not clear. However, the spatial relationship between the various cells suggests the possibility that the transformed endothelial cells, reticular cells, and polymorphic mesenchymal cells may be interrelated and may either be osteoblast progenitor cells or may in some way lead to the appearance of osteoblasts in the early callus. CLINICAL RELEVANCE: The cell pool present in the early medullary callus that eventually leads to bone repair consists of enlarged, transformed endothelial cells, reticular cells, and polymorphic mesenchymal cells. An understanding of the origin of these cells and of their role in the formation of bone may aid in the production of a bone-cell-rich population of cells obtained from the medullary canal, which might be used for injection into osseous defects and fracture non-unions.