Angiogenesis is an essential component of wound healing and inflammation. In the rat subcutaneous sponge implantation model, angiogenesis can be enhanced by administration of the sensory neuropeptide, substance P. We have used quantitative in vitro receptor autoradiography and immunohistochemistry to investigate the development of endogenous neurovascular regulatory systems in the newly-formed granulation tissue of this model. The fraction of endothelial cells immunoreactive for proliferating cell nuclear antigen, endothelial fractional area, and 133Xe clearance were used as measures of endothelial proliferation, neovascularization, and blood flow, respectively. Endothelial proliferation occurred predominantly in tissues surrounding the sponge, and peaked before neovascularization of sponge stroma and the establishment of sponge blood flow. Substance P-containing sensory nerves and specific, high affinity substance P binding sites with characteristics of neurokinin receptors of the NK1 subclass, were localized to microvessels surrounding the sponge at all time points. Lower density substance P binding sites were localized to newly formed microvessels within the sponge stroma, progressively increasing in density from day 4 to day 14. Nerve fibres were observed in the stroma of only 2 of 6 sponges at day 14, and none at earlier time points. These data support the hypothesis that substance P-enhanced angiogenesis in this model results from a direct action on microvascular NK1 receptors. Neovascularization is a sequential process, with early endothelial proliferation followed by new vessel formation and increased blood flow, with maturation of endogenous neurovascular regulatory systems occurring late in this process in inflamed tissues.