Cyclic adenosine monophosphate (cAMP) is an important second messenger mediating physiological functions, including metabolism, gene expression, cell growth and differentiation. Recently, we demonstrated novel roles of cAMP pathway in endothelial cell (EC) differentiation and arterial-venous specification using an embryonic stem cell differentiation system. These studies offered a concept that vascular formation is accomplished by a 2-layered mechanism: (1) a basal mechanism for common EC differentiation, whereby vascular endothelial growth factor (VEGF) signaling plays a central role in the basal mechanism, and (2) a vascular diversification mechanism working on the basis of common EC differentiation. Vascular diversification, such as artery and vein formation, can be only achieved by enacting specific machineries in the presence of the basal EC machinery. cAMP/protein kinase A signaling contributes to common EC differentiation through upregulation of the VEGF-A receptors, Flk1 and neuropilin1. On the other hand, cAMP can activate phosphatidylinositol-3 kinase, which induces an arterial fate in vascular progenitors via dual activation of Notch and β-catenin signaling as an arterial-specific machinery. cAMP signaling thus plays a pivotal role in both the basal and diversification machinery during vascular development.