Members of the Foxo family, Foxo1 (Fkhr), Foxo3 (Fkhrl1), and Foxo4 (Afx), are mammalian homologs of daf-16, which influences life span and energy metabolism in Caenorhabditis elegans. Mammalian FOXO proteins also play important roles in cell cycle arrest, apoptosis, stress resistance, and energy metabolism. In this study, we generated Foxo1-deficient mice to investigate the physiological role of FOXO1. The Foxo1-deficient mice died around embryonic day 11 because of defects in the branchial arches and remarkably impaired vascular development of embryos and yolk sacs. In vitro differentiation of embryonic stem cells demonstrated that endothelial cells derived from wild-type and Foxo1-deficient embryonic stem cells were able to produce comparable numbers of colonies supported by a layer of OP9 stromal cells. Although the morphology of the endothelial cell colonies was identical in both genotypes in the absence of exogenous vascular endothelial growth factor (VEGF), Foxo1-deficient endothelial cells showed a markedly different morphological response compared with wild-type endothelial cells in the presence of exogenous VEGF. These results suggest that Foxo1 is essential to the ability of endothelial cells to respond properly to a high dose of VEGF, thereby playing a critical role in normal vascular development.