The Wilms' tumour gene, Wt1, encodes a zinc finger protein, which is mutated in a subset of paediatric renal carcinomas known as Wilms' tumours (nephroblastomas). Recent findings indicate that Wt1, beside its role in genitourinary development, is also necessary for normal vascularisation of the embryonic heart, and may even be involved in tumour angiogenesis. The original purpose of this study was to decipher potential downstream signalling pathways of Wt1 for blood vessel formation. We found that the Wt1(-KTS) protein, which functions as a transcription factor, stimulated the expression of cadherin 5 (CDH5, vascular endothelial (VE) cadherin) and other vascular genes, i.e. those encoding vascular endothelial growth factor receptors 1 and 2, and angiopoietin-2. Furthermore, an enhancer element was identified in the first intron of the CDH5 gene, which bound to the Wt1(-KTS) protein and was necessary for reporter gene activation by Wt1(-KTS) in transiently transfected cell lines. Wt1 and VE-cadherin proteins could be co-localised by double immunofluorescence staining in maturating glomeruli of embryonic murine kidneys. VE-cadherin transcripts were reduced in some but not all tissues of Wt1-deficient mouse embryos. These results indicate that Wt1 can stimulate vascular gene transcription. By demonstrating that Wt1(-KTS) protein trans-activates an enhancer element in the first intron we identified CDH5 as a novel target gene of Wt1. It is suggested that transcriptional activation of CDH5 by Wt1 fulfils regulatory functions during vascular development and kidney formation.