The formation of capillary-like network structures by cultured vascular endothelial cells on reconstituted basement membrane matrix, Matrigel, models endothelial cell differentiation, the final step of angiogenesis (Kubota et al., 1988; Grant et al., 1989). When endothelial cells derived from bovine aorta and brain capillaries were plated on Matrigel, DNA synthesis was suppressed and a network of capillary-like structures rapidly formed in 8-12 h. With time, the network broke down, resulting in dense cellular cords radiating from multiple cellular clusters in 16-24 h. Finally, multicellular aggregates of cells were formed as the network underwent further retraction. Network regression was prevented when either dithiothreitol (DTT) or anti-TGF-beta 1 antibodies were added during the assay. The addition of exogenous TGF-beta 1 promoted the regression of endothelial cells into the clusters. This response to TGF-beta 1 was blocked by potent serine threonine protein kinase inhibitors, H-7 and HA100. TGF-beta 1 was released from polymerized Matrigel by incubation with Dulbecco's modified eagle's medium (DMEM) in the absence of cells. The Matrigel-conditioned DMEM inhibited endothelial DNA synthesis even in the presence of anti-TGF-beta 1 antibodies. These results suggest that TGF-beta 1 and possibly other soluble factors from Matrigel may be important for differentiation and remodeling of endothelial cells in a capillary network with possible implications for wound healing and development.