Vascular development is a complex but orderly process that is tightly regulated. A number of secreted factors produced by surrounding cells regulate endothelial cell (EC) differentiation, proliferation, migration and coalescence into cord-like structures. Vascular cords then undergo tubulogenesis to form vessels with a central lumen. But little is known about how tubulogenesis is regulated in vivo. Here we report the identification and characterization of a new EC-derived secreted factor, EGF-like domain 7 (Egfl7). Egfl7 is expressed at high levels in the vasculature associated with tissue proliferation, and is downregulated in most of the mature vessels in normal adult tissues. Loss of Egfl7 function in zebrafish embryos specifically blocks vascular tubulogenesis. We uncover a dynamic process during which gradual separation and proper spatial arrangement of the angioblasts allow subsequent assembly of vascular tubes. This process fails to take place in Egfl7 knockdown embryos, leading to the failure of vascular tube formation. Our study defines a regulator that controls a specific and important step in vasculogenesis.