The cell of origin and pathogenesis of the majority of adult soft tissue sarcomas (STS) remains poorly understood. Because mutations in both the P53 and RB tumor suppressor genes are frequent in STS in humans, we inactivated these genes by Cre-loxP-mediated recombination in mice with floxed p53 and Rb. Ninety-three percent of mice developed spindle cell/pleomorphic sarcomas after a single subcutaneous injection of adenovirus carrying Cre-recombinase. Similar to human STS, these sarcomas overexpress Cxcr4, which contributes to their invasive properties. Using irradiation chimeras generated by transplanting bone marrow cells from mice carrying either the Rosa26StoploxPLacZ or the Z/EG reporter, as well as the floxed p53 and Rb genes, into irradiated p53loxP/loxPRbloxP/loxP mice, it was determined that sarcomas do not originate from bone marrow-derived cells, such as macrophages, but arise from the local resident cells. At the same time, dermal mesenchymal stem cells isolated by strict plastic adherence and low levels of Sca-1 expression (Sca-1low, CD31negCD45neg) have shown enhanced potential for malignant transformation according to soft agar, invasion, and tumorigenicity assays, after the conditional inactivation of both p53 and Rb. Sarcomas formed after transplantation of these cells have features typical for undifferentiated high-grade pleomorphic sarcomas. Taken together, our studies indicate that local Sca-1low dermal mesenchymal stem/progenitor cells are preferential targets for malignant transformation associated with deficiencies in both p53 and Rb.