According to the general understanding, the chondrocyte lineage terminates with the elimination of late hypertrophic cells by apoptosis in the growth plate. However, recent cell tracking studies have shown that murine hypertrophic chondrocytes can survive beyond "terminal" differentiation and give rise to a progeny of osteoblasts participating in endochondral bone formation. The question how chondrocytes convert into osteoblasts, however, remained open. Following the cell fate of hypertrophic chondrocytes by genetic lineage tracing using BACCol10;Cre induced YFP-reporter gene expression we show that a progeny of Col10Cre-reporter labelled osteoprogenitor cells and osteoblasts appears in the primary spongiosa and participates - depending on the developmental stage - substantially in trabecular, endosteal, and cortical bone formation. YFP(+) trabecular and endosteal cells isolated by FACS expressed Col1a1, osteocalcin and runx2, thus confirming their osteogenic phenotype. In searching for transitory cells between hypertrophic chondrocytes and trabecular osteoblasts we identified by confocal microscopy a novel, small YFP(+)Osx(+) cell type with mitotic activity in the lower hypertrophic zone at the chondro-osseous junction. When isolated from growth plates by fractional enzymatic digestion, these cells termed CDOP (chondrocyte-derived osteoprogenitor) cells expressed bone typical genes and differentiated into osteoblasts in vitro. We propose the Col10Cre-labeled CDOP cells mark the initiation point of a second pathway giving rise to endochondral osteoblasts, alternative to perichondrium derived osteoprogenitor cells. These findings add to current concepts of chondrocyte-osteocyte lineages and give new insight into the complex cartilage-bone transition process in the growth plate.