The origin of endothelial cells during lung development was investigated by following the expression of an endothelial cell marker, Factor VIII. By the earliest time we examined (rat embryonic day 13) the bronchial buds were surrounded by Factor VIII-positive cells and these endothelial cells followed the epithelium during subsequent bronchial divisions. This suggests that endothelial cells accompany the entry of the tracheal bud and originate from outside the mesenchyme. However, the surrounding mesenchyme simultaneously contained scattered endothelial cells which proliferated as development proceeded. By embryonic day 14, the proliferating endothelial cells appeared to associate into tubular structures whose lining did not form a continuous sheet. Light microscopy showed that cells within this loose network undergo pyknotic cell death. This suggests that the lumen of the blood vessel is generated in situ by deletion of cells. Thus, it appears that the vascular supply of the lung originates from endothelial cells adherent to the invading bronchi (angiogenesis). In addition, in situ formation of blood vessels (vasculogenesis), also seems to occur. Since the lung has three recognizable circulations, pulmonary, alveolar and bronchial, it would be important to investigate which of these two processes underlies the development of these circulations.