Marrow stromal cells (MSCs) are obtained in increased number from mice in which the thrombospondin 2 (TSP2) gene is disrupted, and these cells show increased DNA synthesis in vitro. To examine more closely the role of TSP2 in the physiology and osteogenic differentiation of MSCs, an in‐depth characterization of TSP2‐null MSCs was conducted. Determination of TSP2 protein content by Western analysis and RNA levels by reverse‐transcription polymerase chain reaction (RT‐PCR) indicated that MSCs are the primary source of TSP2 in the marrow and secrete abundant TSP2 into culture medium. Morphologically, the TSP2‐null and wild‐type (WT) cell populations were similar and by flow cytometry contained equivalent numbers of CD44⁺, Mac1⁺, intercellular adhesion molecule‐1 (ICAM‐1⁺), and ScaI⁺ cells. TSP2‐null cells showed delayed mineralization associated with an increased rate of proliferation. Consistent with this finding, there was a decrease in expression of collagen and osteocalcin RNA by TSP2‐null MSCs on day 7 and increased osteopontin expression on day 7 and day 14. In add‐back experiments, recombinant TSP2 produced a dose‐dependent decrease in proliferation. This reduction was associated with an accumulation of TSP2‐treated cells in the G1 phase of the cell cycle and did not result from an increase in apoptosis. When TSP2 treatment was terminated, the cell population reentered the S phase. We conclude that the increased endosteal bone formation observed in TSP2‐null mice results primarily from the failure of TSP2 to regulate locally MSC cell cycle progression.