Promoting bone healing including fracture non-unions are promising targets for bone tissue engineering due to the limited success of current clinical treatment methods. There has been significant research on the use of stem cells with and without biomaterial scaffolds to treat bone fractures due to their promising regenerative capabilities. However, the relative roles of exogenous vs. endogenous stem cells and their overall contribution to in vivo fracture repair is not well understood. The purpose of this study was to determine the interaction between exogenous and endogenous stem cells during bone healing. This study was conducted using a standardized burr-hole bone injury model in a mesenchymal progenitor cell (MPC) lineage-tracing mouse under normal homeostatic and osteoporotic conditions. Burr-hole injuries were treated with a collagen-I biomaterial loaded with and without labelled induced pluripotent stem cells (iPSCs). Using lineage-tracing, the roles of exogenous and endogenous stem cells during bone healing were examined. It was observed that treatment with iPSCs resulted in muted healing compared to untreated controls in intact mice post-injury. When the cell populations were examined histologically, iPSC-treated burr-hole defects presented with a dramatic reduction in endogenous MPCs and cell proliferation throughout the injury site. However, when the ovaries were removed and an osteoporotic-like phenotype induced in the mice, iPSCs treatment resulted in increased bone formation relative to untreated controls. In the absence of iPSCs, endogenous MPCs demonstrated robust proliferative and osteogenic capacity to undertake repair and this behaviour was disrupted in the presence of iPSCs which instead took on an osteoblast fate but with little proliferation. This study clearly demonstrates that exogenously delivered cell populations can impact the normal function of endogenous stem/progenitor populations during the normal healing cascade. These interactions need to be better understood to inform cell and biomaterial therapies to treat fractures.