Embryonic stem cells (ESC) are pluripotent cells that boast unlimited expansion potential in vitro and the ability to differentiate into any cell in the adult body. Maturation of ESC into endothelial cells (EC) provides a developmental model and cell source for therapeutic applications. During vascular development, ESC differentiate into vascular progenitor cells (VPC), a multipotent progenitor that may further specialize into EC and SMC daughter cell populations. However, the cues that guide both VPC and EC differentiation during in vitro vascular specification are still not well understood. Here, I report the generation of a specialized cell line for studying vascular development in vitro. Using serum-free protocols, the generation of VPC from this cell line was optimized for generation of VPC and EC based on peak Flk-1 and VE-cadherin expression respectively. The optimization factors were differentiation length, initial cell seeding density, growth factor concentrations, and substrate. In order to examine the role of insoluble vascular endothelial growth factor (VEGF) signaling, cells were exposed to insoluble VEGF bound within fibronectin matrix and assessed for VPC differentiation and Flt-1 expression. To a lesser extent, smooth muscle cell differentiation and the generation of microvascular formations in a three-dimensional (3D) microfluidic device were also investigated. Overall, the specialized cell line expressed green fluorescent protein under the Tie-2 promoter and red fluorescent protein under the α-SMA promoter. These cells generated a high number and a pure population of Flk-1+ cells that later differentiate into EC cells that express VE-cadherin, acetylated low density lipoprotein, and have the ability to form vascular-like structures. When exposed to high levels of vascular endothelial growth factor (VEGF), both soluble and insoluble in combination, Flt-1 was upregulated. During differentiation, initial cell seeding density and matrix signaling were more statistically significant compared to growth factor concentrations on upregulating VE-cadherin expression. These novel findings highlight the roles of cell adhesion molecules involved in cell-cell communication and matrix binding during the endothelial differentiation process.