During development, the lung mesenchyme has a dynamic relationship with the branching airway. Embryonic lung mesenchyme is loosely packed and composed of indistinguishable cells, yet it is the source of vascular progenitors that will become endothelial cells, smooth muscle cells and fibroblasts. In the lung, vessel development in the periphery proceeds first through vasculogenesis, the migration and assembly of cells into a primitive network, and subsequently, through angiogenesis, the sprouting of vessels from this network. As a way to assess the cellular and molecular mechanisms of lung vascularization, we have isolated and cloned cell lines from mouse fetal lung mesenchyme (MFLM). Two of these MFLM cell lines, MFLM‐4 and MFLM‐91U, display characteristics of an endothelial lineage. RNA analysis demonstrates transcripts for the vascular endothelial growth factor receptors R1 and R2, the receptor tyrosine kinases, Tie‐1 and Tie‐2, as well as the Tie‐2 ligands, Ang‐1 and ‐2. The MFLM cell lines form extensive networks of capillary‐like structures with lumens when cultured on a reconstituted basement membrane. In vivo, following blastocyst injection, the MFLM cells chimerize endothelium of the lung and areas of the heart vasculature. The results from these studies suggest that MFLM‐4 and MFLM‐91U, derived from embryonic lung mesenchyme, can function in vitro and in vivo as endothelial precursors and as models of cardiopulmonary vascularization. Dev Dyn 2000;217:11–23. ©2000 Wiley‐Liss, Inc.