Endothelial cells represent one of the most abundant and widely found cell types in the mammalian embryo. These cells arise in close proximity with and often as an integral part of several organs such as the kidneys, lungs, liver and pancreas. In most of these organs, they play an instructive role to determine the fate of progenitor cells in the developing embryo. Studies carried out until now by Eckhard Lammert, Douglas Melton, Ken Zaret and colleagues have convincingly demonstrated the importance of endothelial cells in normal development of the pancreas. This article reviews the literature in development of endothelial and endodermal cells. Understanding these endothelium-derived signaling mechanisms that allow differentiation of endodermal cells to endocrine pancreatic lineage will help us develop strategies for making insulin-producing cells in vitro.