Embryonic mouse allantoic tissue (E8.5) was cultured in hanging drops to generate a three-dimensional vascular micro-tissue. The resulting tissue spheroids had an inner network of small diameter vessels expressing platelet endothelial cell adhesion molecule-1 (PECAM-1) and an outer layer of cells expressing SMαA, SM22-α, and SM-MHC. In a subsequent phase of culture, the fusion-promoting activity of vascular endothelial growth factor (VEGF) was used to transform the inner network of small diameter endothelial tubes into a contiguous layer of cells expressing PECAM-1, CD34, and VE-cadherin that circumscribed a central lumen-like cavity. The blood vessel-like character of the VEGF-treated spheroids was further demonstrated by their physiologically relevant vasodilatory and contractile responses, including contraction induced by KCl and relaxation stimulated by high-density lipoproteins and acetylcholine-induced nitric oxide production. Developmental Dynamics 237:2918–2925, 2008. © 2008 Wiley-Liss, Inc.