The Arabidopsis thaliana NAC domain transcription factor, vascular-related NAC-DOMAIN7 (VND7), plays a pivotal role in regulating the differentiation of root protoxylem vessels. In order to understand the mechanisms underscoring the function of VND7 in vessel differentiation in more detail, we conducted extensive molecular analyses in yeast (Saccharomyces cerevisiae), Arabidopsis, and Nicotiana tabacum L. cv. Bright Yellow 2 (tobacco BY-2) cells. The transcriptional activation activity of VND7 was confirmed in yeast and Arabidopsis, and the C-terminal region was shown to be required for VND7 transcriptional activation. Expression of the C-terminus-truncated VND7 protein under the control of the native VND7 promoter resulted in inhibition of the normal development of metaxylem vessels in roots and vessels in aerial organs, as well as protoxylem vessels in roots. The expression pattern of VND7 overlapped that of VND2 to VND5 in most of the differentiating vessels. Furthermore, a yeast two-hybrid assay revealed the ability of VND7 to form homodimers and heterodimers with other VND proteins via their N-termini, which include the NAC domain. The heterologous expression of VND7 in tobacco BY-2 cells demonstrated that the stability of VND7 could be regulated by proteasome-mediated degradation. Together these data suggest that VND7 regulates the differentiation of all types of vessels in roots and shoots, possibly in cooperation with VND2 to VND5 and other regulatory proteins.