Notch signaling is active during bone formation and prior studies have shown that it is required for both robust intramembranous and endochondral bone regeneration. Particularly, the systemic blockade of Notch signaling has been shown to inhibit BMP-induced bone formation in a murine calvarial defect model. In this study, we genetically disrupted the expression of both the dominant Notch receptor, Jagged-1, and the essential Notch signaling transcription factor Rbpj in osteoblast progenitors during calvarial bone healing. We found that Jagged-1 (and Jagged-2) expression by alpha Smooth Muscle Actin (αSMA) expressing progenitors is required for bone formation. Similarly, we found that Notch transcriptional activity within the αSMA lineage is required for BMP-induced bone regeneration. Inhibition of Notch signaling in the αSMA lineage resulted in decreased osteoblast progenitors, reduced vascularization, and sustained inflammation 10 days post-injury, with enhanced inflammation still present 42 days post-injury. We conclude that Jagged ligand induced Notch signaling within the osteoblast progenitor lineage is therefore required for bone morphogenetic proteins (BMP) induced bone regeneration. Modulation of Notch signaling may represent a new approach to promote bone repair.