Early embryonic blood vessels are typically composed of fragile tubes of endothelial cells encircled by vascular smooth muscle cells. Early human vasculogenesis was explored in spontaneous and directed differentiation models derived from human embryonic stem (HES) cells. In a 3-dimensional (3D) model, HES cells were studied for their potential for vascular differentiation during the spontaneous formation of embryoid bodies. Directed differentiation was investigated by means of a 2-dimensional (2D) differentiation method to promote vascular differentiation from HES cells (without the formation of embryoid bodies). Using this latter approach, up-regulation of early lineage markers of endothelial progenitors were induced. Additional culture under strict conditions and exposure to angiogenic growth factors resulted in a prolonged differentiation pathway into mature endothelial cells and up-regulation of vascular smooth muscle cell markers. The use of 3D collagen gels and Matrigel assays for the induction and inhibition of human vascular sprouting in vitro further established the vascular potential of the cells generated by the 2D differentiation system. Our study shows that HES cells can provide useful models to study early differentiation and development of blood vessels. Moreover, the 2D differentiation model facilitates both the production of vascular lineage cells from HES cells for various potential therapeutic applications and also provides a model for studying the mechanisms involved in early human embryonic blood vessel development.