During blood vessel assembly, endothelial cells recruit mesenchymal progenitors and induce their differentiation into mural cells via contact-dependent transforming growth factor-beta (TGF-beta) activation. We investigated whether gap junction channels are formed between endothelial cells and recruited mesenchymal progenitors and whether intercellular communication is necessary for endothelial-induced mural cell differentiation. Mesenchymal progenitors from Cx43-/- murine embryos and Cx43+/+ littermates were cocultured with prelabeled endothelial cells. Intracellular dye injection and dual whole-cell voltage clamp revealed that endothelial cells formed gap junction channels with Cx43+/+ but not Cx43-/- progenitors. In coculture with endothelial cells, Cx43-/- progenitors did not undergo mural cell differentiation as did Cx43+/+ cells. Stable reexpression of Cx43 in Cx43-/- cells (reCx43) restored their ability to form gap junctions with endothelial cells and undergo endothelial-induced mural cell differentiation. Cocultures of endothelial cells and either Cx43+/+ or reCx43 mesenchymal cells produced activated TGF-beta; endothelial-Cx43-/- cocultures did not. However, Cx43-/- cells did produce latent TGF-beta and undergo mural cell differentiation in response to exogenous TGF-beta1. These studies indicate that gap junction communication between endothelial and mesenchymal cells mediates TGF-beta activation and subsequent mural cell differentiation.