Hypertrophic nonunion usually results from insufficient fracture stabilization. Therefore, most hypertrophic nonunions simply require the stabilization of the nonunion site. However, the reasons why union occurs without treating the nonunion site directly is not well understood biologically. In this study, we hypothesized that the intervening tissue at the hypertrophic nonunion site (nonunion tissue) could serve as a reservoir of mesenchymal progenitor cells and investigated whether the cells derived from nonunion tissue had the capacity for multilineage mesenchymal differentiation. After nonunion tissue was obtained, it was cut into strips and cultured. Homogenous fibroblastic adherent cells were obtained. Flow cytometry revealed that the adherent cells were consistently positive for mesenchymal stem cell related markers CD13, CD29, CD44, CD90, CD105, CD166, and negative for the hematopoietic markers CD14, CD34, CD45, and CD133, similar to control bone marrow stromal cells. In the presence of lineage-specific induction factors, the adherent cells differentiated in vitro into osteogenic, chondrogenic, and adipogenic cells. These results demonstrated for the first time that hypertrophic nonunion tissue contains multilineage mesenchymal progenitor cells. This suggests that hypertrophic nonunion tissue plays an important role during the healing process of hypertrophic nonunion by serving as a reservoir of mesenchymal cells that are capable of transforming into cartilage and bone forming cells.