Vascular plants (Tracheophytes) have adapted to a variety of environments ranging from arid deserts to tropical rainforests, and now comprise >250,000 species. While they differ widely in appearance and growth habit, all of them share a similar specialized tissue system (vascular tissue) for transporting water and nutrients throughout the organism. Plant vascular systems connect all plant organs from the shoot to the root, and are comprised of two main tissue types, xylem and phloem. In this review we examine the current state of knowledge concerning the process of vascular tissue formation, and highlight important mechanisms underlying key steps in vascular cell type specification, xylem and phloem tissue patterning, and, finally, the differentiation and maturation of specific xylem cell types.