New blood forming vessels are produced by differentiation of mesodermal precursor cells to angioblasts that become endothelial cells (ECs) which in turn give rise to primitive capillary network. Human cord blood (HCB) contains large subsets of mononuclear cells (MNCs) that can be differentiated into endothelial-like cells in vitro. Human mononuclear progenitor cells were purified from fresh umbilical cord blood by the expression of CD34 and FLK-1 antigens expressed in both angioblasts and hematopoetic stem cells. The HCB derived mesenchymal stem cells (MSCs) can be differentiated into adipocyte, osteocyte, chondrocyte and ECs. In this study, the differentiation of human cord blood mesenchymal stem cells (hCBMSCs) into endothelial-like cells was induced in the presence of vascular endothelial growth factor (VEGF) and insulin-like growth factor (IGF-1). The differentiated ECs were then examined for their ability to express VEGF receptor-2 (VEGFR2) and von Willebrand factor (vWF). These cells were adopted to grow, proliferate and develop into a capillary network in a semisolid gel matrix in vitro. The capillary network formation in each well of 24-well plate was found to be 80% in presence of VEGF (40 ng/ml) and IGF-1 (20 ng/ml) of culture media, suggesting that the capillary network formation is associated with endothelial-like cells derived from hCBMSCs by expression of their markers.