CD34 is a transmembrane glycoprotein constitutively expressed on endothelial cells and hematopoietic stem cells. Use of CD34-recognizing antibodies has helped in the identification and isolation of CD34(+) endothelial precursors from embryonic and adult tissues. However, CD34-null mice display no vascular abnormalities, demonstrating that CD34 antigen expression is not required for normal vascular development. Here we show that a CD34(-) cell population that includes endothelial cell precursors can be isolated from cord blood. In the presence of angiogenic factors, these cells mature to express the endothelial cell markers vascular endothelial-cadherin, vascular endothelial growth factor receptor-1 and -2, Tie-1 and -2 (tyrosine kinase with immunoglobulin and epidermal growth factor homology domains), von Willebrand factor, and CD31 while maintaining their CD34(-) status, and can be expanded in vitro for over 20 passages. Moreover, in functional studies, these cells can undergo extracellular matrix-dependent morphogenic changes into capillary-like tubular structures. When transplanted into immunodeficient mice in conjunction with tumor cells or with the pro-angiogenic factor basic fibroblast growth factor, these cells can form functional microvessels arising along with host blood cells. These studies provide strong evidence for the existence of CD34(-) endothelial cell precursors in cord blood and suggest the use of ex vivo-expanded cord blood CD34(-) cells as a unique tool for the investigation of postnatal lineage diversification.