The biological relationships among self-renewal, tumorigenicity and lineage differentiation of human osteosarcoma-initiating cells (OSIC) remain elusive, making it difficult to identify and distinguish OSIC from osteosarcoma-forming cells (OSFC) for developing OSIC-targeted therapies. Using a new inverse-lineage tracking strategy coupled with serial human-to-mouse xenotransplantation, we identified a subpopulation of osteosarcoma cells with OSIC-like properties and sought to distinguish them from their progeny, OSFC. We found that serial transplantation of cells from different osteosarcoma cell lines and primary osteosarcoma tissues progressively increased the CD49f(+) subpopulation composing the bulk of the osteosarcoma mass. These CD49f(+) cells displayed characteristics of OSFC: limited in vivo tumorigenicity, weak lineage differentiation, more differentiated osteogenic feature and greater chemo-sensitivity. By contrast, their parental CD49f(-)CD133(+) cells had an inhibited osteogenic fate, together with OSIC-like properties of self-renewal, strong tumorigenicity and differentiation to CD49f(+) progeny. Hence, the CD49f(-)CD133(+) phenotype appears to identify OSIC-like cells that possess strong tumorigenicity correlated with an impaired osteogenic fate and the ability to initiate tumor growth through the generation of CD49f(+) progeny. These findings advance our understanding of OSIC-like properties and, for the first time, provide a much-needed distinction between OSIC and OSFC in this cancer.