The cranial neural crest (CNC) cells play a vital role in craniofacial development and regeneration. They are multi-potent progenitors, being able to differentiate into various types of tissues. Both pre-migratory and post-migratory CNC cells are plastic, taking on diverse fates by responding to different inductive signals. However, what sustains the multipotency of CNC cells and derivatives remains largely unknown. In this study, we present evidence that FGF8 signaling is able to sustain progenitor status and multipotency of CNC-derived mesenchymal cells both in vivo and in vitro. We show that augmented FGF8 signaling in pre-migratory CNC cells prevents cell differentiation and organogenesis in the craniofacial region by maintaining their progenitor status. CNC-derived mesenchymal cells with Fgf8 overexpression or control cells in the presence of exogenous FGF8 exhibit prolonged survival, proliferation, and multi-potent differentiation capability in cell cultures. Remarkably, exogenous FGF8 also sustains the capability of CNC-derived mesenchymal cells to participate in organogenesis such as odontogenesis. Furthermore, FGF8-mediated signaling strongly promotes adipogenesis but inhibits osteogenesis of CNC-derived mesenchymal cells in vitro. Our results reveal a specific role for FGF8 in the maintenance of progenitor status and in fate determination of CNC cells, implicating a potential application in expansion and fate manipulation of CNC-derived cells in stem cell-based craniofacial regeneration.