Regulation of cell differentiation and assembly remains a fundamental question in developmental biology. During development, tissues emerge from coordinated sequences of the renewal, differentiation, and assembly of stem cells. Likewise, regeneration of an adult tissue is driven by the migration and differentiation of repair cells. The fields of stem cells and regenerative medicine are starting to realize how important is the entire context of the cell environment, with the presence of other cells, three-dimensional matrices, and sequences of molecular and physical morphogens. The premise is that to unlock the full potential of stem cells, at least some aspects of the dynamic environments normally present in vivo need to be reconstructed in experimental systems used in vitro. We review here some recent work that utilized engineered environments for guiding the embryonic and adult human stem cells, and focus on vasculogenesis as a critical and universally important aspect of tissue development and regeneration. Birth Defects Research (Part C) 84:335-347, 2008. (c) 2008 Wiley-Liss, Inc.