Periosteum and periosteum-derived progenitor cells have demonstrated the potential for stimulative applications in repairs of various musculoskeletal tissues. It has been found that the periosteum contains mesenchymal progenitor cells capable of differentiating into either osteoblasts or chondrocytes depending on the culture conditions. Anatomically, the periosteum is a heterogeneous multi-layered membrane, consisting of an inner cambium and an outer fibrous layer. The present study was designed to elucidate the cellular phenotypic characteristics of cambium and fibrous layer cells in vitro, and to assess whether structural integrity of the tendon in the bone tunnel can be improved by periosteal augmentation of the tendon­bone interface. It was found the cells from each layer showed distinct phenotypic characteristics in a primary monolayer culture system. Specifically, the cambium cells demonstrated higher osteogenic characteristics (higher alkaline phosphatase and osteocalcin levels), as compared to the fibrous cells. Also in vivo animal model showed that a periosteal augmentation of a tendon graft could enhance the structural integrity of the tendon-bone interface, when the periosteum is placed between the tendon and bone interface with the cambium layer facing toward the bone. These findings suggest that extra care needs to be taken in order to identify and maintain the intrinsic phenotypes of the heterogeneous cell types within the periosteum. This will improve our understanding of periosteum in applications for musculoskeletal tissue repairs and tissue engineering.