The signaling pathways regulating blood vessel growth and development are not well understood. In the present report, an in vitro model was used to identify signaling pathways regulating capillary formation in embryonic endothelial cells. Basic fibroblast growth factor (bFGF) plus leukemia inhibitory factor (LIF) optimally stimulate the formation of capillary-like structures of the embryonic endothelial cell line IEM. LIF stimulation of IEM cells leads to activation of the Stat3 as well as the (P41/43)mitogen-activated protein kinase ((P41/43)MAPK) cascade, while bFGF does not activate Stat3 but does induce the (P41/43)MAPK cascade. Inhibition of Stat3 DNA-binding activity by expression of a dominant inhibitory Stat3 mutant increases the capillary outgrowth of the IEM cells induced by LIF. Increased Stat3 activity by overexpression of the wild-type Stat3 greatly reduced capillary outgrowth. In contrast, inhibition of the (P41/43)MAPK cascade using a MEK-1 inhibitor dramatically inhibits the LIF-induced capillary outgrowth. Moreover, the increased formation of capillary-like structures of the IEM cells mediated by Stat3 inhibition does not overcome the requirement for activation of the (P41/43)MAPK pathway for capillary outgrowth. Stat3 activity correlates with the LIF-induced expression of the negative feedback regulators of the Janus (JAK) family of tyrosine kinases, SOCS-1 and SOCS-3. These results provide evidence that Stat3 acts as a negative regulator of capillary outgrowth, possibly by increasing SOCS-1 or SOCS-3 expression. The contradictory signals stimulated by LIF could be necessary to control the intensity of the response leading to capillary outgrowth in vivo.