Recent data from multiple laboratories (16–24) have indicated that microvascular smooth muscle cells known as pericytes represent osteoprogenitors capable of bone formation when placed in the correct microenvironment. Pericytes appear to arise from a vessel-associated stem cell progenitor (mesoangioblast; refs. 20, 31, 32), and during the process of mesoderm growth and angiogenesis, this VEGFR2-expressing stem cell undergoes expansion (23, 31). In this issue of the JCI, Wang et al. (3) demonstrate that osteoblast HIFα subunits, transcriptional regulators of VEGF expression, represent rate-limiting components of osteogenic-angiogenic coupling and trabecular bone formation. Augmentation of osteoblast HIFα expression and bone formation was achieved by conditionally deleting Vhl, the gene encoding pVHL — the E3 ubiquitin ligase necessary for HIFα degradation. Bone formation was not cell autonomous — i.e., not dependent solely on osteoblast functions — but required VEGF-mediated paracrine signals in bone that stimulated angiogenesis. Since VEGF can expand VEGFR2-expressing mesoangioblast numbers during angiogenesis (33), this process may drive the increase in osteoblast numbers that promotes massive trabecular bone formation in the osteogenic marrow environment. PHD enzyme activity is also required for HIFα degradation, oxidatively “tagging” HIFα for recognition by pVHL. In addition to low oxygen levels (as shown here), mechanical stimuli, TNF-α, and reactive oxygen species can also upregulate HIFα expression (29). Strategies that augment osteoblast HIFα/VEGF signaling by selectively inhibiting skeletal PHD may increase bone formation and enhance fracture healing. BMSC, bone marrow stromal cell; CVC, calcifying vascular cell; GTF, general transcription factor; Pol II, RNA polymerase II; Ub, ubiquitin.