In human corneal epithelium, self-renewal and fate decision of stem cells are highly regulated in a niche microenvironment called palisades of Vogt in the limbus. Herein, we discovered that digestion with dispase, which cleaves off the basement membrane, did not remove the entire basal epithelial progenitor cells. In contrast, digestion with collagenase isolated on cluster consisting of not only entire epithelial progenitor cells but also their closely associated mesenchymal cells because of better preservation of some basement membrane matrix. Collagenase isolated more basal epithelial progenitor cells, which were p63α+ and small in the size (8 μm in diameter), and generated significantly more holoclones and meroclones on 3T3 fibroblast feeder layers than dispase. Further, collagenase isolated more small pan-cytokeratin-/p63α-/vimentin+ cells with the size as small as 5 μm in diameter and heterogeneously expressing vimentin, Oct4, Sox2, Nanog, Rex1, Nestin, N-cadherin, SSEA4, and CD34. Maintenance of close association between them led to clonal growth in a serum-free, low-calcium medium, whereas disruption of such association by trypsin/EDTA resulted in no clonal growth unless cocultured with 3T3 fibroblast feeder layers. Similarly, on epithelially denuded amniotic membrane, maintenance of such association led to consistent and robust epithelial outgrowth, which was also abolished by trypsin/EDTA. Epithelial outgrowth generated by collagenase-isolated clusters was significantly larger in diameter and its single cells yielded more holoclones on 3T3 fibroblast feeder layers than that from dispase-isolated sheets. This new isolation method can be used for exploring how limbal epithelial stem cells are regulated by their native niche cells.