We employed an in vitro angiogenesis model that simulates the in vivo milieu for tumor capillary formation to study the direct effects of estrogen. 17beta-estradiol (E2) treatment significantly stimulated capillary sprouting within 8 h in co-cultures of rat aortic endothelial cells (RAECs) and mouse mammary tumor cells. Co-cultures treated with either progesterone (P4) or E2+P4 showed minimal endothelial cell (EC) sprouting when compared to E2 treated cultures. Treatment with the E2 agonist ICI 182,780 dramatically inhibited capillary formation, demonstrating E2-specificity. Within hours, of E2 treatment ECs isolated from tumor cell/EC co-cultures demonstrated a statistically significant increase in both mRNA and protein levels of the transcription factor Ets-1. We observed increased matrix metalloproteinase (MMP) and decreased tissue inhibitor of metalloproteinase (TIMP) mRNA levels in these ECs following E2 treatment. Ets-1 upregulates expression of the vascular endothelial growth factor (VEGF) receptor, Flt-1 and we detected increased Flt-1 mRNA levels in ECs co-cultured with tumor cells following E2 treatment. Expression of Ets-1 contributes to destabilization of a quiescent EC phenotype in favor of an invasive angiogenic one, in part, by increasing expression of MMPs and integrin molecules that favor migration and invasion. Transfection of ECs with Ets-1 antisense prior to co-culture with E2 resulted in a 95% inhibition in capillary formation. We demonstrate here, for the first time that nanomolar concentrations of E2 directly and rapidly induced new capillary formation in a mammary tumor/EC co-culture system and suggest that this response may be mediated, in part, by an E2-induced increase in Ets-1 expression.