Sonic Hedgehog (Shh)-deficient mice have a severe lung branching defect. Recent studies have shown that hedgehog signaling is involved in vascular development and it is possible that the diminished airway branching in Shh-deficient mice is due to abnormal pulmonary vasculature formation. Therefore, we investigated the role of Shh in pulmonary vascular development using Shh/Tie2lacZ compound mice, which exhibit endothelial cell-specific LacZ expression, and Pecam-1 immunohistochemistry. In E11.5-13.5 Shh-deficient mice, the pulmonary vascular bed is decreased, but appropriate to the decrease in airway branching. However, when E12.5 Shh-deficient lungs were cultured for 4-6 days, the vascular network deteriorated compared to wild-type lungs. The expression of vascular endothelial growth factor (Vegf) or its receptor Vegfr2 (KDR/Flk-1) was not different between E12.5-13.5 Shh-deficient and wild-type lungs. In contrast, angiopoietin-1 (Ang1), but not Ang2 or the angiopoietin receptor Tie2, mRNA expression was downregulated in E12.5-E13.5 lungs of Shh null mutants. Recombinant Ang1 alone was unable to restore in vitro branching morphogenesis in Shh-deficient lungs. Conversely, the angiogenic factor fibroblast growth factor (Fgf)-2 alone or in combination with Ang1, increased vascularization and tubular growth and branching of Shh-deficient lungs in vitro. The angiogenic factors did not overcome the reduced smooth muscle cell differentiation in the Shh null lungs. These data indicate that early vascular development, mediated by Vegf/Vegfr2 signaling proceeds normally in Shh-deficient mice, while later vascular development and stabilization of the primitive network mediated by the Ang/Tie2 signaling pathway are defective, resulting in an abnormal vascular network. Stimulation of vascularization with angiogenic factors such as Fgf2 and Ang1 partially restored tubular growth and branching in Shh-deficient lungs, suggesting that vascularization is required for branching morphogenesis.