In this study characterization of endothelial cells differentiated from human bone marrow mesenchymal stem cells (hBMCs) was investigated in relation to their capillary network formation potential. Differentiation was performed in presence of vascular endothelial growth factor (VEGF) and insulin like growth factor-1 (IGF-1). A panel of cellular and molecular markers was used for characterization of the endothelial cells. The cells were strongly positive for von Willebrand factor (vWF) and vascular endothelial growth factor receptor 2 (VEGFR2) when measured at protein and mRNA levels. Development of endothelial cells was found to be associated with formation of typical organelles such as Weibel Palade (WP) bodies, Cavealae and pinocytic vesicles. Early vessel growth was also evidenced by showing specific junctions between the cells. The migratory and angiogenic properties of the cells were confirmed by showing capillary network formation in vitro. These results indicate that the capacity of endothelial cells differentiated from hBMSCs in formation of vascular system is consistent with molecular and structural development.