Fracture nonunion is a major complication of bone fracture regeneration and repair. The molecular mechanisms that result in fracture nonunion appearance are not fully determined. We hypothesized that fracture nonunion results from the failure of hypoxia and hematoma, the primary signals in response to bone injury, to trigger Bmp2 expression by mesenchymal progenitor cells (MSCs). Using a model of nonstabilized fracture healing in transgenic 5'Bmp2BAC mice we determined that Bmp2 expression appears in close association with hypoxic tissue and hematoma during the early phases of fracture healing. In addition, BMP2 expression is induced when human periosteum explants are exposed to hypoxia ex vivo. Transient interference of hypoxia signaling in vivo with PX-12, a thioredoxin inhibitor, results in reduced Bmp2 expression, impaired fracture callus formation and atrophic-like nonunion by a HIF-1 alpha independent mechanism. In isolated human periosteum-derived MSCs, BMP2 expression could be induced with the addition of platelets concentrate lysate but not with hypoxia treatment, confirming HIF-1 alpha-independent BMP2 expression. Interestingly, in isolated human periosteum-derived mesenchymal progenitor cells, inhibition of BMP2 expression by PX-12 is accomplished only under hypoxic conditions seemingly through dis-regulation of reactive oxygen species (ROS) levels. In conclusion, we provide evidence of a molecular mechanism of hypoxia-dependent BMP2 expression in MSCs where interference with ROS homeostasis specifies fracture nonunion-like appearance in vivo through inhibition of Bmp2 expression.