Blood vessel formation requires the integrated regulation of endothelial cell proliferation and branching morphogenesis, but how this coordinated regulation is achieved is not well understood. Flt-1 (vascular endothelial growth factor [VEGF] receptor 1) is a high affinity VEGF-A receptor whose loss leads to vessel overgrowth and dysmorphogenesis. We examined the ability of Flt-1 isoform transgenes to rescue the vascular development of embryonic stem cell-derived flt-1-/- mutant vessels. Endothelial proliferation was equivalently rescued by both soluble (sFlt-1) and membrane-tethered (mFlt-1) isoforms, but only sFlt-1 rescued vessel branching. Flk-1 Tyr-1173 phosphorylation was increased in flt-1-/- mutant vessels and partially rescued by the Flt-1 isoform transgenes. sFlt-1-rescued vessels exhibited more heterogeneous levels of pFlk than did mFlt-1-rescued vessels, and reporter gene expression from the flt-1 locus was also heterogeneous in developing vessels. Our data support a model whereby sFlt-1 protein is more efficient than mFlt-1 at amplifying initial expression differences, and these amplified differences set up local discontinuities in VEGF-A ligand availability that are important for proper vessel branching.