Eph receptor tyrosine kinases and their cell-surface-bound ligands, the ephrins, regulate axon guidance and bundling in the developing brain, control cell migration and adhesion, and help patterning the embryo. Here we report that two ephrinB ligands and three EphB receptors are expressed in and regulate the formation of the vascular network. Mice lacking ephrinB2 and a proportion of double mutants deficient in EphB2 and EphB3 receptor signaling die in utero before embryonic day 11.5 (E11.5) because of defects in the remodeling of the embryonic vascular system. Our phenotypic analysis suggests complex interactions and multiple functions of Eph receptors and ephrins in the embryonic vasculature. Interaction between ephrinB2 on arteries and its EphB receptors on veins suggests a role in defining boundaries between arterial and venous domains. Expression of ephrinB1 by arterial and venous endothelial cells and EphB3 by veins and some arteries indicates that endothelial cell-to-cell interactions between ephrins and Eph receptors are not restricted to the border between arteries and veins. Furthermore, expression of ephrinB2 and EphB2 in mesenchyme adjacent to vessels and vascular defects in ephB2/ephB3 double mutants indicate a requirement for ephrin-Eph signaling between endothelial cells and surrounding mesenchymal cells. Finally, ephrinB ligands induce capillary sprouting in vitro with a similar efficiency as angiopoietin-1 (Ang1) and vascular endothelial growth factor (VEGF), demonstrating a stimulatory role of ephrins in the remodeling of the developing vascular system.