PURPOSE. We investigated whether human limbal niche cells generate mesenchymal stem cells. METHODS. Limbal niche cells were isolated from the limbal stroma by collagenase alone or following dispase removal of the limbal epithelium (D/C), and cultured on plastic in Dulbecco's modified Eagle's medium (DMEM) with 10% fetal bovine serum (FBS), or coated or three-dimensional Matrigel in embryonic stem cell medium with leukemia inhibitory factor and basic fibroblast growth factor. Expression of cell markers, colony-forming units-fibroblast, tri-lineage differentiation, and ability of supporting limbal epithelial stem/progenitor cells were compared to limbal residual stromal cells. RESULTS. Stromal cells expressing angiogenesis markers were found perivascularly, subjacent to limbal basal epithelial cells, and in D/C and limbal residual stromal cells. When seeded in three-dimensional Matrigel, D/C but not limbal residual stromal cells yielded spheres of angiogenesis progenitors that stabilized vascular networks. Similar to collagenase-isolated cells, D/C cells could be expanded on coated Matrigel for more than 12 passages, yielding spindle cells expressing angiogenesis and mesenchymal stem cells markers, and possessing significantly higher colony-forming units-fibroblast and more efficient trilineage differentiation than D/C and limbal residual stromal cells expanded on plastic in DMEM with 10% FBS, of which both lost the pericyte phenotype while limbal residual stromal cells turned into myofibroblasts. Upon reunion with limbal epithelial stem/progenitor cells to form spheres, D/C cells expanded on coated Matrigel maintained higher expression of p63 alpha and lower expression of cytokeratin 12 than those expanded on plastic in DMEM with 10% FBS, while spheres formed with human corneal fibroblasts expressed cytokeratin 12 without p63 alpha. CONCLUSIONS. In the limbal stroma, cells subjacent to limbal basal epithelial cells serve as niche cells, and generate progenitors with angiogenesis and mesenchymal stem cells potentials. They might partake in angiogenesis and regeneration during corneal wound healing. (Invest Ophthalmol Vis Sci. 2012;53:5686-5697) DOI:10.1167/iovs.12-10300