Development of the vascular system depends on the highly coordinated actions of a variety of angiogenic regulators. Several of these regulators are members of the tyrosine kinase superfamily, including VEGF receptors and angiopoietin receptors, Tie1 and Tie2. Tyrosine kinase signaling is counter-regulated by the activity of tyrosine phosphatases, including vascular endothelial protein tyrosine phosphatase (VE-PTP), which has previously been shown to modulate Tie2 activity. We generated mice in which VE-PTP is replaced with a reporter gene. We confirm that VE-PTP is expressed in endothelium and also show that VE-PTP is highly expressed in the developing outflow tract of the heart and later is expressed in developing heart valves. Vasculogenesis occurs normally in mice lacking VE-PTP; however, angiogenesis is abnormal. Angiogenic defects in VE-PTP-null mice were most pronounced in the yolk sac and include a complete failure to elaborate the primitive vascular scaffold into higher-order branched arteries, veins, and capillaries. VE-PTP continues to be expressed into adulthood in the vasculature and heart valves, suggesting later roles in vascular development or homeostasis. VE-PTP is also expressed in the vasculature of growing tumors, suggesting that VE-PTP may be a new potential target for angiogenic therapies.