Mouse embryogenesis is dose sensitive to vascular endothelial growth factor-A (VEGF-A), and mouse embryos partially deficient in VEGF-A die in utero because of severe vascular defects. In this study, we investigate the possible causes that underlie this phenomenon. Although the development of vascular defects in VEGF-A-deficient embryos seems to suggest that endothelial differentiation depends on the presence of a sufficient level of VEGF-A, we were surprised to find that endothelial differentiation per se is insensitive to a significant loss of VEGF-A activity. Instead, the development of the multipotent mesenchymal cells, from which endothelial progenitors arise in the yolk sac, is most highly dependent on VEGF-A. As a result of VEGF-A deficiency, dramatically fewer multipotent mesenchymal cells are generated in the prospective yolk sac. However, among the small number of mesenchymal cells that do enter the prospective yolk sac, endothelial differentiation occurs at a normal frequency. In the embryo proper, vasculogenesis is initiated actively in spite of a significant VEGF-A deficiency, but the subsequent steps of vascular development are defective. We conclude that a full-level VEGF-A activity is not critical for endothelial specification but is important for two distinct processes before and after endothelial specification: the development of the yolk sac mesenchyme and angiogenic sprouting of blood vessels.