Vascularization defects in genetic recombinant mice have defined critical roles for a number of specific receptor tyrosine kinases. Here we evaluated whether an endothelium-expressed receptor tyrosine phosphatase, CD148 (DEP-1/PTPeta), participates in developmental vascularization. A mutant allele, CD148(DeltaCyGFP), was constructed to eliminate CD148 phosphatase activity by in-frame replacement of cytoplasmic sequences with enhanced green fluorescent protein sequences. Homozygous mutant mice died at midgestation, before embryonic day 11.5 (E11.5), with vascularization failure marked by growth retardation and disorganized vascular structures. Structural abnormalities were observed as early as E8.25 in the yolk sac, prior to the appearance of intraembryonic defects. Homozygous mutant mice displayed enlarged vessels comprised of endothelial cells expressing markers of early differentiation, including VEGFR2 (Flk1), Tal1/SCL, CD31, ephrin-B2, and Tie2, with notable lack of endoglin expression. Increased endothelial cell numbers and mitotic activity indices were demonstrated. At E9.5, homozygous mutant embryos showed homogeneously enlarged primitive vessels defective in vascular remodeling and branching, with impaired pericyte investment adjacent to endothelial structures, in similarity to endoglin-deficient embryos. Developing cardiac tissues showed expanded endocardial projections accompanied by defective endocardial cushion formation. These findings implicate a member of the receptor tyrosine phosphatase family, CD148, in developmental vascular organization and provide evidence that it regulates endothelial proliferation and endothelium-pericyte interactions.