The resting zone of the postnatal growth plate is organized by slow-cycling chondrocytes expressing parathyroid hormone-related protein (PTHrP), which include a subgroup of skeletal stem cells that contribute to the formation of columnar chondrocytes. The PTHrP–Indian hedgehog feedback regulation is essential for sustaining growth plate activities; however, molecular mechanisms regulating cell fates of PTHrP+ resting chondrocytes and their eventual transformation into osteoblasts remain largely undefined. Here, in a mouse model, we specifically activated Hedgehog signaling in PTHrP+ resting chondrocytes and traced the fate of their descendants using a tamoxifen-inducible Pthrp-creER line with patched-1–floxed and tdTomato reporter alleles. Hedgehog-activated PTHrP+ chondrocytes formed large, concentric, clonally expanded cell populations within the resting zone (“patched roses”) and generated significantly wider columns of chondrocytes, resulting in hyperplasia of the growth plate. Interestingly, Hedgehog-activated PTHrP+ cell descendants migrated away from the growth plate and transformed into trabecular osteoblasts in the diaphyseal marrow space in the long term. Therefore, Hedgehog activation drives resting zone chondrocytes into transit-amplifying states as proliferating chondrocytes and eventually converts these cells into osteoblasts, unraveling a potentially novel Hedgehog-mediated mechanism that facilitates osteogenic cell fates of PTHrP+ skeletal stem cells.