Pain is a central feature of soft tissue trauma, which under certain contexts, results in aberrant osteochondral differentiation of tissue-specific stem cells. Here, the role of sensory nerve fibers in this abnormal cell fate decision is investigated using a severe extremity injury model in mice. Soft tissue trauma results in NGF (Nerve growth factor) expression, particularly within perivascular cell types. Consequently, NGF-responsive axonal invasion occurs which precedes osteocartilaginous differentiation. Surgical denervation impedes axonal ingrowth, with significant delays in cartilage and bone formation. Likewise, either deletion of Ngf or two complementary methods to inhibit its receptor TrkA (Tropomyosin receptor kinase A) lead to similar delays in axonal invasion and osteochondral differentiation. Mechanistically, single-cell sequencing suggests a shift from TGFβ to FGF signaling activation among pre-chondrogenic cells after denervation. Finally, analysis of human pathologic specimens and databases confirms the relevance of NGF-TrkA signaling in human disease. In sum, NGF-mediated TrkA-expressing axonal ingrowth drives abnormal osteochondral differentiation after soft tissue trauma. NGF-TrkA signaling inhibition may have dual therapeutic use in soft tissue trauma, both as an analgesic and negative regulator of aberrant stem cell differentiation.