Many clinical trials have attempted to use stem cells to treat ischemic heart diseases (IHD), but the benefits have been modest. Though coronary collaterals can be a “natural bypass” for IHD patients, the regulation of coronary collateral growth (CCG) and the role of endogenous stem cells in CCG are not fully understood. In this study, we used a bone marrow transplantation scheme to study the role of bone marrow stem cells (BMSCs) in a rat model of CCG. Transgenic GFP rats were used to trace BMSCs after transplantation; GFP bone marrow was harvested or sorted for bone marrow transplantation. After recovering from transplantation, the recipient rats underwent 10 days of repetitive ischemia (RI), with echocardiography before and after RI, to measure cardiac function and myocardial blood flow. At the end of RI, the rats were sacrificed for the collection of bone marrow for flow cytometry or heart tissue for imaging analysis. Our study shows that upon RI stimulation, BMSCs homed to the recipient rat hearts’ collateral-dependent zone (CZ), proliferated, differentiated into endothelial cells, and engrafted in the vascular wall for collateral growth. These RI-induced collaterals improved coronary blood flow and cardiac function in the recipients’ hearts during ischemia. Depletion of donor CD34+ BMSCs led to impaired CCG in the recipient rats, indicating that this cell population is essential to the process. Overall, these results show that BMSCs contribute to CCG and suggest that regulation of the function of BMSCs to promote CCG might be a potential therapeutic approach for IHD.