Induction by fibroblast growth factors of mesoderm during gastrulation leads to blood-forming tissue, including angioblasts and hemopoietic cells, that together constitute the blood islands of the yolk sac. The differentiation of angioblasts from mesoderm and the formation of primitive blood vessels from angioblasts at or near the site of their origin are the two distinct steps during the onset of vascularization that are defined as vasculogenesis. Vascular endothelial growth factor and its high-affinity receptor tyrosine kinase flk-1 represent a paracrine signaling system crucial for the differentiation of endothelial cells and the development of the vascular system. Specified cell adhesion molecules such as VE-cadherin and PECAM-1 (CD-31), and transcription factors such as ets-1, as well as mechanical forces and vascular regression and remodeling are involved in the subsequent events of endothelial cell differentiation, apoptosis, and angiogenesis.