The epicardium is a reservoir of progenitors that give rise to coronary vasculature and stroma during development and mediates cardiac vascular repair. However, its role as a source of progenitors in the adult mammalian heart remains unclear due to lack of clear lineage markers and single-cell culture systems to elucidate epicardial progeny cell fate. We found that in vivo exposure of mice to physiological hypoxia induced adult epicardial cells to re-enter the cell cycle and to express a subset of developmental genes. Multiplex single cell transcriptional profiling revealed a lineage relationship between epicardial cells and smooth muscle, stromal cells, as well as cells with an endothelial-like fate. We found that physiological hypoxia promoted a perinatal-like progenitor state in the adult murine epicardium. In vitro clonal analyses of purified epicardial cells showed that cell growth and subsequent differentiation is dependent upon hypoxia, and that resident epicardial cells retain progenitor identity in the adult mammalian heart with self-renewal and multilineage differentiation potential. These results point to a source of progenitor cells in the adult heart that can be stimulated in vivo and provide an in vitro model for further studies.