Interstitial collagen I stimulates microvascular endothelial cells to form solid cords that imitate precapillary structures found during angiogenesis. Time-lapse microscopy identified cell retraction and disruption of cell-cell contacts as early critical steps in collagen I-induced capillary morphogenesis. These early stages paralleled collagen I activation of Src kinase and GTPase Rho through beta1 integrins. The Src inhibitor PP2, dominant-negative Src, and Rho inhibitor exoenzyme C3 transferase each inhibited collagen I induction of actin stress fibers that mediate cell retraction and each inhibited capillary morphogenesis. Collagen I also disrupted VE-cadherin from intercellular junctions through a Src-dependent mechanism; both the Src inhibitor PP2 and dominant-negative Src preserved VE-cadherin localization to regions of cell-cell contact. An active Src mutant disrupted VE-cadherin and cell-cell contacts similarly to collagen I. In sharp contrast, laminin-1 did not induce capillary morphogenesis, and laminin-1 did not induce activation of Src or Rho. Rather, laminin-1 induced persistent activation of the GTPase Rac. Thus, these studies identify activation of Src and Rho as key mechanisms by which collagen I provokes capillary morphogenesis of microvascular endothelial cells, and they define marked differences between the functions of collagen I and laminin-1 in regulating endothelial cell morphogenesis.