Arteries and veins are morphologically, functionally and molecularly very different, but how this distinction is established during vasculogenesis is unknown. Here we show, by lineage tracking in zebrafish embryos, that angioblast precursors for the trunk artery and vein are spatially mixed in the lateral posterior mesoderm. Progeny of each angioblast, however, are restricted to one of the vessels. This arterial-venous decision is guided by gridlock (grl), an artery-restricted gene that is expressed in the lateral posterior mesoderm. Graded reduction of grl expression, by mutation or morpholino antisense, progressively ablates regions of the artery, and expands contiguous regions of the vein, preceded by an increase in expression of the venous marker EphB4 receptor (ephb4) and diminution of expression of the arterial marker ephrin-B2 (efnb2). grl is downstream of notch, and interference with notch signalling, by blocking Su(H), similarly reduces the artery and increases the vein. Thus, a notch-grl pathway controls assembly of the first embryonic artery, apparently by adjudicating an arterial versus venous cell fate decision.