Non-union fractures have considerable clinical and economic burdens and yet the underlying pathogenesis remains largely undetermined. The fracture healing process involves cellular differentiation, callus formation and remodeling, and implies the recruitment and differentiation of mesenchymal stem cells that are not fully characterized. C-X-C chemokine receptor 4 (CXCR4) and Insulin-like growth factor 1 receptor (IGF-1R) are expressed in the fracture callus, but their interactions still remain elusive. We hypothesized that the regulation of CXCR4 by IGF-1R signaling is essential to maintain the bone homeostasis and to promote fracture repair. By using a combination of in vivo and in vitro approaches, we found that conditional ablation of IGF-1R in osteochondroprogenitors led to defects in bone formation and mineralization that associated with altered expression of CXCR4 by a discrete population of endosteal cells. These defects were corrected by AMD3100 (a CXCR4 antagonist). Furthermore, we found that the inducible ablation of IGF-1R in osteochondroprogenitors led to fracture healing failure, that associated with an altered expression of CXCR4. In vivo AMD3100 treatment improved fracture healing and normalized CXCR4 expression. Moreover, we determined that these effects were mediated through the IGF-1R/Insulin receptor substrate 1 (IRS-1) signaling pathway. Taken together, our studies identified a novel population of endosteal cells that is functionally regulated through the modulation of CXCR4 by IGF-1R signaling, and such control is essential in bone homeostasis and fracture healing. Knowledge gained from these studies has the potential to accelerate the development of novel therapeutic interventions by targeting CXCR4 signaling to treat non-unions.